A retail coffee company is planning to open 110 new coffee outlets that are expected to generate $15.9 million in free cash flows per year,with a growth rate of 3.5% in perpetuity. If the coffee company's WACC is 9.5%, what is the NPV of this expansion?The present value of the free cash flows is $million. (Round to two decimal places.)

Free cash flow per year is $15.9 million per year The growth rate is 3.5% WACC is 9.5% To Find: NPV…

Answered: A retail coffee company is planning to…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Globex Corp. is expected to generate a free cash flow (FCF) of $145.00 million this year (FCF₁ = $145.00 million), and the FCF is expected to grow at a rate of 25.00% over the following two years (FCF2 and FCF3). After the third year, however, the FCF is expected to grow at a constant rate of 3.90% per year, which will last forever (FCF4). Assume the firm has no nonoperating assets. If Globex Corp.'s weighted average cost of capital (WACC) is 11.70%, what is the current total firm value of Globex Corp.? (Note: Round all intermediate calculations to two decimal places.) O $2,603.11 million O $3,123.73 million O $437.64 million O $3,455.59 million Globex Corp.'s debt has a market value of $1,952 million, and Globex Corp. has no preferred stock. If Globex Corp. has 375 million shares of common stock outstanding, what is Globex Corp.'s estimated intrinsic value per share of common stock? (Note: Round all intermediate calculations to two decimal places.) O $1.74 O $0.74 $1.91
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7. A company is considering purchasing equipment for a new product line. The initial investment is R1,500,000. The equipment needs an upgrade after 5 years, this will cost another R750,000. The incremental cashflows for the next 10 years will be R500,000 per year, starting from the end of the first year. The investment period is 10 years. The company's WACC is 12%. Calculate the NPV and the MIRR for the project. Should the company invest in the equipment?
For a major plant expansion project, a company wants to have $63 million 5 years from now If the company that t will have the $63 milion 5 years from now? The funds earn interest at the rate of 10% per year.
A firm is considering a new inventory system that will cost $120,000. The system is expected to generate positive cash flows over the next four years in the amounts of $35,000 in year 1, $55,000 in year 2, $65,000 in year 3, and $40,000 in year 4. The firm’s required rate of return is 9%. What is the payback period of this project? 1.95 years 2.46 years 2.99 years 3.10 years Based on the information from Question 47. What is the net present value (NPV) of the project? $28,830.29 $30,929.26 $36,931.43 $39,905.28 Based on the information from Question 47, what is the internal rate of return (IRR) of this project? 14.03% 17.56% 19.26% 21.78% Based on the information from Question 47, what is the profitability index (PI) of this project? 0.87 1.11 1.31 1.83.
Allied Biscuit Co. is expected to generate a free cash flow (FCF) of $7,795.00 million this year (FCF, = $7,795.00 million), and the FCF is expected to grow at a rate of 19.00% over the following two years ( FCF, and FCF). After the third year, however, the FCF is expected to grow at a constant rate of 2.10% per year, which will last forever (FCF). Assume the firm has no nonoperating assets. If Allied Biscuit Co.'s weighted average cost of capital (WACC) is 6.30 %, what is the current total firm value of Allied Biscuit Co. ? (Note: Round all intermediate calculations to two decimal places.) $293,072.74 million $ 24,732.03 million $297,760.66 million $248, 133.88 million
A new company estimates that by investing in a new process, it will increase its sales by $2.5 million one year from now and a further $1 million one and half year from now. Assume interest rate of 16% per year, compounded semiannually. Please write formula, use compound interest table for extracting factors, show your solution step by step. a) Draw cash flow diagram b) What is the maximum amount the company can afford to spend now on the new process in order to break even? Compare PP and CP and use first method (determine effective rate per compounding period).
1. Show your solutions completely. The ABC Freight Company has invested USD80,000 in a new sorting machine that is expected to produce a return of USD9,000 per year for the next 10 years. a.) At a 9% annual interest rate, is this investment worthwhile? b.) If the new machine was not purchased and the amount of USD80,000 was invested in another business that would give a 10% interest rate, what would be the equivalent future amount at the end of 10 years? Mr. Mason wants to open an account in a bank with a 3% interest rate, so he can withdraw after the 25th year the amount of USD4,500 each year for 5 years. a.) How much should he deposit now? b.) should he decide not to withdraw any amount after 25 years, and instead withdraw the whole amount at the end of the 30th year, how much can he withdraw assuming that the interest rate is uniform? c. If Mr. Mason wishes to withdraw the amount of USD4,500 each year for 5 years, beginning at the end of the first year after the making the initial…
Beckham Corp. is considering an investment which should be worth $600,000 10 years from now when it earns 7% compounded annually.Question: Rounding to the nearest whole dollar, what is the most Beckham should pay today for this investment?
A firm is considering investing in a new project with an upfront cost of $300 million. The project will generate an incremental free cash flow of $50 million in the first year and this cashflow is expected to grow at an annual rate of 5% forever. If the firm's WACC is 11%, what is the value of this project? A. $833.3 million B. $875.0 million C. $575.0 million D. $533.3 million

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