Question 19 Pinks Co. is considering a project with an initial cost of $5 million. The project will produce cash inflows of $2 million a year for five years. The firm has a weighted average cost of capital of 13%. Assume that the project has an average risk level as the whole firm. What is the net present value of the project? O $3.26 million O $4.48 million O $1.58 million O $2.03 million. Question 20 Daffodil Inc. has a cost of equity of 16 percent and an after-tax cost of debt of 4 percent. The firm's weighted average cost of capital is 13.6 percent. What is the firm's debt-equity ratio (D/E)? O 0.33 O 0.50 O 0.25 0.40

Question 19 Pinks Co. is considering a project with an initial cost of $5 million. The project will produce cash inflows of $2 million a year for five years. The firm has a weighted average cost of capital of 13%. Assume that the project has an average risk level as the whole firm. What is the net present value of the project? O $3.26 million O $4.48 million O $1.58 million O $2.03 million. Question 20 Daffodil Inc. has a cost of equity of 16 percent and an after-tax cost of debt of 4 percent. The firm's weighted average cost of capital is 13.6 percent. What is the firm's debt-equity ratio (D/E)? O 0.33 O 0.50 O 0.25 0.40

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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Am. 121.
13. The IBC Company is considering undertaking an investment that promises to have the following cash flows Period 0 is = -$100 Period 1 is= $150 Period 2 is = $50 Period 3 is = $50 If it waits a year, it can invest in an alternative (that is, mutually exclusive) investment that promises to pay Period 1 Period 2 Period 3 −$150 $250 $50 Assume a time value of money of 0.05. Which investment should the firm undertake? Use the present value method and the internal rate of return approaches. With the IRR approach, use the incremental cash flows.
A risky $420,000 investment is expected to generate the following cash flows: Year 1 2 3 4$ 102,700 $ 163,030 $ 160,824 $ 135,200 If the firm’s cost of capital is 12 percent, should the investment be made?. Use a minus sign to enter a negative value, if any. Round your answer to the nearest dollar.NPV: $ Should The investment be made? An alternative use for the $420,000 is a four-year U.S. Treasury bond that pays $25,200 annually and repays the $420,000 at maturity. Management believes that the cash inflows from the risky investment are equivalent to only 70 percent of the certain investment, which pays 6 percent. Should the investment be made? Use Appendix B to answer the question. Do not round other intermediate calculations. NPV: $ Should The investment be made?
None
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 9 percent, and that the maximum allowable payback and discounted payback statistics for the project are 2.0 and 3.0 years, respectively. Time: 0 1 2 3 4 5 6 Cash flow: −$7,100 $1,000 $2,200 $1,400 $1,400 $1,200 $1,000 Use the IRR decision rule to evaluate this project. (Negative amount should be indicated by a minus sign. Round your answer to 2 decimal places.) Should it be accepted or rejected?multiple choice accepted rejected
None
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
Q16
Question 4 a. The stock market provides an annual return of 8.4%. A risky project costs £35,000 but provides £20,000 cash flow for two years. Would you invest in the project? Why/Why Not? b. Assume in order to undertake this project the firm needs to undertake project 2 that costs £12,000 but provides a one-year cash flow of £13,500 and project 3 that costs £8,000 but provides three years of cash flow of £3,000. Will the firm still take on the project and how much will firm value and increase? c. Your client has been given a trust fund valued at £1.25 million. He cannot access the money until he turns 65 years old, which is in 25 years. At that time, he can withdraw £24,000 per month. If the trust fund is invested at a 4.5 percent rate, compounded monthly, how many months will it last your client once he starts to withdraw the money? d. You are comparing houses in two towns in Sheffield. You have £100,000 to put as a down payment, and 30-year mortgage rates are at 8% Location 1…

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