Honda is considering an entry into the light jet manufacturing industry. This new project "HondaJet" being a little riskier than their current line of operations, Honda'sglobal CEO has decided to add an additional 3.25 % to the company's overall cost of capital when evaluating this project. Honda is considering an equity offering of $420million to fund this project and the capital structure for the "HondaJet" division will have 30 percent debt and 70 percent equity. Nomura Securities has agreed to managethis issue at an overall cost of 4.32% to Honda. The company's cost of equity and after-tax cost of debt are estimated at 14.23% and 7.78%. The cash flows are estimated as:1st Yr: $40 mill; 2nd Yr: $70 mill; 3rd Yr thru 16th Yr: $82 mill. What is the projected NPV of the "HondaJet" project?O 1.$9 million approx.O 2.S96 million approx.O 3. $10 million approxO 4.-$9 million approx.O 5.$77 million approx..

NPV is the most used for financial analysis of project and is the difference in present value of…

s issue at an overall cost of 4.32% to Honda. The company's cost of equity and after-tax cost of debt are estimated at 14.23% and 7.78%. Yr: $40 mill; 2nd Yr: $70 mill; 3rd Yr thru 16th Yr: $82 mill. What is the projected NPV of the "HondaJet" project? 1. $9 million approx. 2.596 million approx. 3.S10 million approx 4.-59 million approx. 4

s issue at an overall cost of 4.32% to Honda. The company's cost of equity and after-tax cost of debt are estimated at 14.23% and 7.78%. Yr: $40 mill; 2nd Yr: $70 mill; 3rd Yr thru 16th Yr: $82 mill. What is the projected NPV of the "HondaJet" project? 1. $9 million approx. 2.596 million approx. 3.S10 million approx 4.-59 million approx. 4

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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subject : Finance
A project has following estimated data: Price = $60 per unit; variable cost = $30 per unit; Fixed cost = $100,000; Company has borrowings of $100,000 at a rate of 10%. Calculate the combined leverage of the project when units sold are 10,000 units. а. 1.58 b. 0.63 с. 1.50 d. 1.05
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27.
Finance
HMT Co is considering a project with the following cash flows. Year Initial investment cost cash inflows Net cash flows Variable (000) RO. (000) RO. (000) RO. (000) RO. 6,000 3,000 7,000 4,000 2 3,000 7,000 4,000 Cash flows arise from selling 750,000 units at RO.12 per unit. HMT Co has a cost of capital of 9%. You are required to calculate the sensitivity % of the variable initial investment. a. 17.27% b. None of the options c. 18.27% d. 16.27%
a project fixed cost of $55,000 per year. The operating cash flow at 7,550 units is $56,900. Ignore taxes. what will be the new degree of operating leverage if the number of units sold rises to 9,445?
At 10% interest, what is the nearest benefit/cost ratio for the following private sector project: Initial Cost 200,000 Additional costs at the EoY 1-2 30.000 Annual Benefits at the EoY 1-10 90,000 Salvage Value 40,000 Project Life 10 Note: Consider the following equation setup: FW(Bene fits) = Annual Bene fits (F/A, 10%, 10) FW(Costs) = Instial Costs + Additional Costs - (F/A, 10%, 2) (F/P, 10%, 8)- Salvage Value %3D 10% Compound Interest Factors F/P P/F A/F A/P F/A P/A 1 1.100 0.9091 1.0000 1.1000 1.000 0.909 2 1.210 0.8264 0.4762 0.5762 2.100 1.736 3 1.331 0.7513 0.3021 0.4021 3.310 2.487 4. 1.464 0.6830 0.2155 0.3155 4.641 3.170 1.611 0.6209 0.1638 0.2638 6.105 3.791 9. 1.772 0.5645 0.1296 0.2296 7.716 4.355 1.949 0.5132 0.1054 0.2054 9.487 4.868 8. 2.144 0.4665 0.0874 0.1874 11.436 5.335 6. 2.358 0.4241 0.0736 0.1736 13.580 5.759 10 2.594 0.3855 0.0627 0.1627 15.937 6.145 11 2.853 0.3505 0.0540 0.1540 18.531 6.495 12 3.138 0.3186 0.0468 0.1468 21.384 6.814 13 3.452 0.2897 0.0408…
Finnegan Company plans to Invest In a new operating plant that Is expected to cost $500,000. The projected Incremental Income from the Investment Is as follows: Net Income Year After Tax 1 $30,000 $45,000 $50,000 $55,000 $40,000 $20,000 The unadjusted rate of return on the Inltial Investment would be approximately. Multiple Choice 80% 6.0%. 16.7% 48.0%
A sponsor puts $10m of equity into a project. Over a 20 year timespan, the project returns $28m in distributions to equity. An NPV calculation at a 10% p.a. discount rate shows an NPV of -$2m. What is the most likely IRR? O 0% O 8% O O 10% O 12% O 14%
Project (20%) (Project analysis) Consider the following three mutually exclusive projects: Cash flow at yr 3 500 Cash flow at yr 0 Cash flow at yr 1 2000 -3000 Cash flow at yr 2 1000 1000 7000 2000 1000 10000 A B C -3000 -5000 2000 a. (5%) Determine the payback period for each of the projects. b. (5%) Calculate the NPV of each of the project if interest rate is 4% compounded yearly. c. (5%) Calculate the IRR for each of the projects. d. (5%) Calculate the profitability index for each of the projects.
27² Riai Airlines is considering two alternative Planes. Plane A has an expected life of Sures Years, has an after-tax cost of $80 millian, and will produce after-tax cash flows ofst 21 $40 million per year. Plane B has a life of 10 years, has an after-tax cast of $119 million, and will produce after-tax cash flows of 121 $35 million per year. Rim plans to serve the uni route for 10 years. The company's WACC is 8%. If Rini needs to purchase a new Plane A, the after-tux cost will be $90 million, but cash inflows will remain the Should Rini all acquire Plan A or Plane B? Explain your answer, Enter your answers in millions. For example, same. on answer $10, 550,000 should be entered as lo.ss. Do not round intermediate calculations. Round your criswer to two decimal places. 2004200 Plane is the better project and will increase $ - $ the company's value by 5 millions. millions f ex boll 19 E TOUS

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