None 7%, and re 10.5%. IfOver-the-Top Canopies (OTC) is evaluating two independent investments. Project S costs $165,000 and has an IRR equal to 8 percent, and Project L costs $155,000 and has an IRRequal to 6 percent. OTC's capital structure consists of 20 percent debt and 80 percent common equity, and its component costs of capital are rar = 4%, r₁ =OTC expects to generate $250,000 in retained earnings this year, which project(s) should be purchased? Round your answers to one decimal place.ProjectSLWACCAcceptable?%-Select-v%-Select-vThus, -Select-should be purchased.

Step 1:Type of CapitalProportionCostProp.*CostDebt0.20.040.008Equity0.80.1050.084Total1 0.092…

Answered: 7%, and re 10.5%. If Over-the-Top…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 11P

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Over-the-Top Canopies (OTC) is evaluating two independent investments. Project S costs $155,000 and has an IRR equal to 9 percent, and Project L costs $145,000 and has an IRR equal to 8 percent. OTC's capital structure consists of 20 percent debt and 80 percent common equity, and its component costs of capital are rdT = 4%, rs = 10%, and re = 13.5%. If OTC expects to generate $230,000 in retained earnings this year, which project(s) should be purchased? Round your answers to one decimal place. Project S -> WACC ______ % -> Acceptable? Yes / No Project L -> WACC ______ % -> Acceptable? Yes / No Thus, (ONLY PROJECT S, ONLY PROJECT L, BOTH PROJECTS, NEITHER PROJECT) should be purchased.
Over-the-Top Canopies (OTC) is evaluating two independent investments. Project 5 costs $150,000 and has an IRR equal to 13 percent, and Project L costs $140,000 and has an IRR equal to 11 percent. OTC's capital structure consists of 20 percent debt and 80 percent common equity, and its component costs of capital are far = 3%, rs = 11%, and re = 12.5%. If OTC expects to generate $220,000 in retained earnings this year, which project(s) should be purchased? Round your answers to one decimal place. Acceptable? Project S L Thus, -Select- WACC % % should be purchased, -Select- -Select-
Please help! Thank you so much in advance. I need to show all work.
The Emu Manufacturing Company is considering five independent investment opportunities. The required investment outlays and expected internal rates of return (IRR) for these investments are shown below. The firm's cost of capital is 14% and its target optimal capital structure is a debt ratio of 30%. Internally generated funds totalling $900,000 are available for all investment opportunities. (i) Based on the IRR method, which investment(s) should be accepted? (ii) If the company were to undertake all acceptable investments, what amount should be paid out in dividends according to the residual dividend policy? (iii) What would be the amount of external finance required if the company were to undertake all acceptable investments?
Management of Blossom, Inc., is considering investing in three independent projects. The costs and the cash flows are given in the following table. The appropriate cost of capital is 13.00 percent. Year 0 1 2 3 4 Project 1 -$250,000 56,700 76,500 76,500 90,000 Project 2 -$324,000 The IRR of project 1 is 157,925 160,750 100,800 Project 3 -$480,000 214,500 Blossom should accept project(s) 214,500 214,500 Compute the project IRRs. (Round final answers to 2 decimal places, e.g. 15.25%.) 214,500 Identify the projects that should be accepted. %, project 2 is %, and project 3 is
A firm with a cost of capital of 7 percent is evaluating three independent capital projects. The internal rates of return are as follows: Internal Rate of Return T1% Proj ect 2. 3. The firm should accept Project 2, and reject Projects 1 and 3 O accept Project 1, and reject Projects 2 and 3 O accept Project 1 and 2, and reject Project 3 O accept Project 3, and reject Projects 1 and 2
A firm utilizes a strategy of capital rationing, which is currently $375,000 and is considering the following two projects: Project A has a cost of $335,000 and the following cash flows: year 1$140,000; year 2$150,000; and year 3$100,000. Project B has a cost of $365,000 and the following cash flows: year 1$220,000; year 2$110,000; and year 3$150,000. Using a 6% cost of capital, which decision should the financial manager make? Multiple Choice Do not select either project. Select project B. Select project A. Select both projec
Following Is Information on two alternative Investments belng considered by Tiger Co. The company requires a 4% return from Its Investments. Project X1 $(100,000) Project X2 $(160,800) Initial investment Expected net cash flows in: Year 1 35,000 45,500 70,500 75,000 65, 000 55,000 Year 2 Year 3 Compute the Internal rate of return for each of the projects using Excel functlons. Based on Internal rate of return, Indicate whether each project Is acceptable. (Round your answers to 2 declmal places.) IRR Acceptable? Project X1 Project X2 Mc Graw Hill Lducation Type here to search *+ F10 F11 AI F2 F7 F8 F9 F3 F4 F5 F6 F1 & 23 4 5 7 T G H. V N M C * 0O B
he Ham Company is analyzing new capital investments.Projects X Y and Z. Each project has a cost of X = $6,500, Y = $5,400, and Z = $4,560 and the required rate for each is 13%.The expected flows are as follows.Year X Y Z1 $1,500.00 $2,300.00 $2,800.002 $2,000.00 $2,600.00 $1,900.003 $3,000.00 $2,700.00 $1,500.00Which project should be accepted?Calculate the IRR, NPV and PaybackPlease if you can send me the excel to: 0229275@up.edu.mxOr if you don't upload a photo of the document so I can take a screenshot, thanks
Project S has a cost of $10,000 and is expected to produce benefits (cash flows) of $3,000 per year for 5 years. Project L costs $25,000 and is expected to produce cash flows of $7,400 per year for 5 years. Calculate the two projects’ NPVs, IRRs, MIRRs, and PIs, assuming a cost of capital of 12%. Which project would be selected, assuming they are mutually exclusive, using each ranking method? Which should actually be selected?
Edelman Engineering is considering including two pieces of equipment, a truck and an overhead pulley system, in this year’s capital budget. The projects are independent. The cash outlay for the truck is $17,100, and that for the pulley system is $22,430. The firm’s cost of capital is 14%. After-tax cash flows, including depreciation, are as follows: Calculate the IRR, the NPV, and the MIRR for each project, and indicate the correct accept/reject decision for each.
Dinaro Inc. is looking at an investment project that has an NPV of ($5,000). The hurdle rate is 8%.

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