Problem 12-19 Calculating the WACC [LO 3] Gnomes R Us is considering a new project. The company has a debt-equity ratio of .72. The company's cost of equity is 14.7 percent, and the aftertax cost of debt is 8 percent. The firm feels that the project is riskier than the company as a whole and that it should use an adjustment factor of +2 percent. a. What is the company's WACC? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. b. What discount rate should the firm use for the project? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. a. WACC b. Project discount rate % %

can i have help solving this using Excel pls?

pm

Nikul

Problem 8-14 Problems with Profitability Index [LO 4, 6] The Michner Corporation is trying to choose between the following two mutually exclusive design projects: Year Cash Flow (I) Cash Flow (II) 0 -$ 80,000 -$ 38,000 1 31,000 13,000 2 27,500 3 19,500 40,000 46,000 a-1. If the required return is 14 percent, what is the profitability index for each project? Note: Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161. a-2. If the company applies the profitability index decision rule, which project should it take? b-1. If the required return is 14 percent, what is the NPV for each project? Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. b-2. If the company applies the net present value decision rule, which project should it take? a-1. Project I a-2. Project II b-1. Project I b-2. Project II

Question 7 The financial manager of O.Biney Ltd is considering investing in a building project costing $200,000. The following cash flows are expected from the project. The beta of the project is 1.25 and the market return is 25%. The risk free rate of return is 14%. Year $ 0 (200,000) 1 40,000 2 45,000 3 92,000 4 95,000 e) What is the expected return/cost of equity on this project? f) GBaidoo Enterprise is a levered entity with percentage of debt out of total capital being 40%. If the interest rate on a bank loan is 20% and the cost of equity is as computed in (a), what will be the NPV of the investment? g) What is the IRR for the project? h) Reinvesting at overall cost of capital, what will be the MIRR for the proposed investment? i) What is the payback period of the project and the accounting rate of return? j) What will be your overall advice concerning viability of the project?

Chapter 11, Question 9

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A Problem 13-5 Calculating Expected Return [LO1] Consider the following information: State of Economy Recession Boom Probability of Portfolio State of Return if State Occurs -.20 .28 Economy .35 .65 Calculate the expected return. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Expected return t ] nces %

SML and WACC [LO1] An all-equity firm is considering the following projects: Project W X Y Z Beta 0.80 0.90 1.45 1.60 Expected Return 10% 12 13 15 The T-bill rate is 5 percent, and the expected return on the market is 11 percent. a. Which projects have a higher expected return than the firm's 11 percent cost of capital? b. Which projects should be accepted? c. Which projects would be incorrectly accepted or rejected if the firm's overall cost of capital were used as a hurdle rate?