Problem 11-13 Flotation Cost (LG11-2)A firm is considering a project that will generate perpetual after-tax cash flows of $23,500 per year beginning next year. The projecthas the same risk as the firm's overall operations and must be financed externally. Equity flotation costs 12 percent and debt issuescost 5 percent on an after-tax basis. The firm's D/E ratio is 0.7.What is the most the firm can pay for the project and still earn its required return?Note: Do not round Intermediate calculations. Round your answer to the nearest whole dollar.Maximum the firm can pay

Step 1: Given Value for Calculation After Tax Cash Flow = cf = $23,500Equity Flotation Cost = ec =…

Answered: Problem 11-13 Flotation Cost (LG11-2) A…

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter10: Project Cash Flows And Risk

Section: Chapter Questions

Problem 16PROB

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Question 2 A firm is considering an investment project that has a cost of $1 million and is expected to generate an annual after-tax cash flow of $250,000 for five years. It has already spent $25,000 in research and development (R&D) costs for the project. If the firm's required rate of return is 14 percent and consider R&D a sunck cost, what is the NPV of this project? A $25,000 B -$141,750 C +141,750 D $858,250
aj.7 Steve's Stoves Company, which desires a minimum rate of return on its investment projects of 15%, has two proposals under consideration. Their costs and expected cash flows are: A B Initial Investment $96,000 $132,000 Expected after-tax cash flows: Year 1 $40,000 $52,000 Year 2 $32,000 $56,000 Year 3 $48,000 $40,000 Year 4 $24,000 $32,000 In addition, proposal B has an expected cash salvage value at the end of four years of $8,000. The present value of $1 due in 1, 2, 3, and 4 years at 15% is .86957, .75614, .65752, and .57175, respectively.Using the profitability index method, determine which project, if either, should be accepted by the company.
QUESTION 7 A company is considering to invest in a project that is expected to yield the following cash flows; the firm's required rate of return from the project is 10%. Initial Outflow = $200,000 Cash Flow Year 1 = $80,000 Cash Flow Year 4 = $160,000 Cash Flow Year 5 = $120,000 What is the project's NPV? O 50,310.77 O 49,689.85 O 56,519.98 O 42,859.72 O 36,029.58
10.5 Net present value: Blanda Incorporated management is considering investing in two alternative production systems. The systems are mutually exclusive, and the cost of the new equipment and the resulting cash flows are shown in the accompanying table. If the firm uses a 9 percent discount rate for production system projects, in which system should the firm invest? Year System 1 System 2 -$15,000 -$45,000 1 15,000 32,000 2 15,000 32,000 15,000 32,000 10.6 Payback: Refer to Problem 10.5. What are the payback periods for production systems 1 and 2? If the systems are mutually exclusive and the firm always chooses projects with the lowest payback period, in which system should the firm invest? 10.7 Payback: Quebec, Inc., is purchasing machinery at a cost of $3,768,966. The company's management expects the machinery to produce cash flows of $979,225, $1,158,886, and $1,881,497 over the next three years, respectively. What is the payback period? 10.8 Payback: Northern Specialties just…
5.1.3 Calculate the Net Present Value of each project (with amounts rounded off to the nearest Rand). INFORMATION Zeda Enterprises has the option to invest in machinery in projects A and B but finance is only available to invest in one of them. You are given the following projected data: Initial cost Scrap value Depreciation per year Net profit Year 1 Year 2 Year 3 Year 4 Year 5 Net cash flows Year 1 Year 2 Year 3 Year 4 Year 5 Project A R300 000 R40 000 R52 000 R20 000 R30 000 R50 000 R60 000 R10 000 Project B R300 000 0 R60 000 R90 000 R90 000 R90 000 R90 000 R90 000
Can I get the answers to 10.7 and 10.8
4 Quantitative Problem: Bellinger Industries is considering two projects for inclusion in its capital budget, and you have been asked to do the analysis. Both projects' after-tax cash flows are shown on the time line below. Depreciation, salvage values, net operating working capital requirements, and tax effects are all included in these cash flows. Both projects have 4-year lives, and they have risk characteristics similar to the firm's average project. Bellinger's WACC is 9%. 0 1 2 3 4 Project A -920 650 395 230 280 Project B -920 250 330 380 730 What is Project A's NPV? Round your answer to the nearest cent. Do not round your intermediate calculations.$ What is Project B's NPV? Round your answer to the nearest cent. Do not round your intermediate calculations.$ If the projects were independent, which project(s) would be accepted?-Select-NeitherProject AProject BBoth projects A and BCorrect 1 of Item 3If the projects were mutually…
Problem 13-11 Spreadsheet Problem: IRR (LG13-4) Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 10 percent, and that the maximum allowable payback and discounted payback statistics for your company are 30 and 35 years, respectively. -$245,000 $ 66,000 Use the IRR decision rule to evaluate this project Note: Do not round intermediate calculations and round your final answer to 2 decimal places. Cash flow IRR Should it be accepted or rejected? (Click to select) $ 55,000 $ 142,000 $ 123,000 $82,200 Check my work
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3 Quantitative Problem: Bellinger Industries is considering two projects for inclusion in its capital budget, and you have been asked to do the analysis. Both projects' after-tax cash flows are shown on the time line below. Depreciation, salvage values, net operating working capital requirements, and tax effects are all included in these cash flows. Both projects have 4-year lives, and they have risk characteristics similar to the firm's average project. Bellinger's WACC is 10%. 0 1 2 3 4 Project A -950 550 370 220 360 Project B -950 150 305 370 810 What is Project A’s IRR? Do not round intermediate calculations. Round your answer to two decimal places.% What is Project B's IRR? Do not round intermediate calculations. Round your answer to two decimal places.% If the projects were independent, which project(s) would be accepted according to the IRR method?-Select-NeitherProject AProject BBoth projects A and BCorrect 1 of Item 3If the…

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