#7 Suppose that Caterpillar (CAT) has a project with the following cash flows: YEAR Cash flow 0 -$40.00 1 2 $13.00 $11.00 3 $11.00 4 $12.00 The company has debt valued at 45.00 billion on its balance sheet, while the market value of its common stock is roughly 31.00 billion. The yield to maturity on the debt is 5.50%, and the cost of equity for the firm is 12.00%. Finally, the marginal tax rate facing the company is 34.00%. What is the NPV for this project?

7. Assume a company is going to make an investment of $300,000 in a machine and the following are the cash flows that two different products would bring in years one through four. The company's required rate of return is 12%. Option A                   Option B Product A                 Product B $190,000                    $150,000 190,000                      180,000 60,000                         60,000 20,000                         70,000 Using the appropriate EXCEL spreadsheet in the Chapter11 NPV IRR Analysis.xlsx Download Chapter11 NPV IRR Analysis.xlsx, answer the following questions: What is the NPV for Option A?  What is the NPV for Option B?  What is the IRR for Option A?  What is the IRR for Option B?  PLEASE NOTE #1: The dollar amounts will be with "$" and commas as needed and rounded to two decimal places (i.e. $12,345.67). Round your IRR answers, in percentage format, to two decimal places (i.e. 12.34%).  Given the above answers, which project should the…

Y8 For the given cash flows, suppose the firm uses the NPV decision rule. Year Cash Flow 0 −$ 149,000 1 67,000 2 72,000 3 56,000 At a required return of 8 percent, what is the NPV of the project? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. At a required return of 21 percent, what is the NPV of the project? Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.

A company forecasts a free cash flow of $55 million in Year 3, i.e., at t = 3, and it expects FCF to grow at a constant rate of 5.5% thereafter. If the weighted average cost of capital (WACC) is 10.0% and the cost of equity is 15.0%, then what is the horizon, or continuing, value in millions at t = 3? Group of answer choices $1,083 $1,148 $1,289 $1,186 $1,212

Howell Petroleum, Incorporated, is trying to evaluate a generation project with the following cash flows Year 0 1 2 Cash Flow -$ 44,500,000 70,500,000 -19,500,000 a. If the company requires a return of 8 percent on its investments, what is the NPV of the project? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. b. Compute the IRRS for this project. Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g.. 32.16. Enter the larger IRR in the first answer box and the smaller IRR in the second answer box. If you can only calculate one IRR. enter it in both boxes to receive partial credit. A negative answer should have a minus sign. a. NPV b. Larger IRR Smaller IRR 4,059,670.78 22 72 % 1%

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At the present time, t = 0, your company has assets-in-place and $200m in cash. One period from now, t=1, assets-in-place will have a value of $600m, with probability 1/2, and $200m, with probability 1/2. The beta of these assets is zero. Your company also has an outstanding debt with face value $400m, due at t=1. The company has an investment project; that requires at t=0 an investment of $160m and will have a certain payoff of $200m at t=1. The risk-free rate is zero, and there are no taxes. a) Should your company take the project? b) Discuss how your answer would change if you finance this project with secured debt.

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5.2 D'Arcy (Builders) Ltd is considering three possible investment projects: A, B and C. The expected pattern of cash flows for each project is: Project cash flows A B £m £m £m Initial outlay (17) (20) (24) 1 year's time 11 12 9 2 years' time 3 years' time 4 years' time 7 9 7 7 11 6 13 The business has a cost of capital of 10 per cent and the investment budget for next year is £25 million. Required: Which investment project(s) should the business undertake assuming each project is: (a) divisible (b) indivisible?

A firm wants to start a project. A team of financial analysts estimated the following cash flows year                  cash flow  0                        -$100,000 1                              55,000  2                            43,000 3                             45,000 Suppose that the discount rate (interest rate) is 12%. The NPV is Group of answer choices $115,416.59 $15,416.59 $10,206.14 $-11,627.12