Tomodachi Co plans to invest in either Projects M or N which are described below. The company's cost of capital is 15%, the market return is 15% and the risk-free rate is 5%. The beta for project M is 1.20 and the beta for project N is 1.40. What is the NPV for Project M when using the risk-adjusted discount rate method of project evaluation? Initial Investment Project M $700,000 Project N $780,000 Year 1 $300,000 $220,000 2 $300,000 320,000 3 $300,000 380,000 4 $300,000 460,000 or You must decide firm which of the proposed projects should be accepted for the upcoming year since only $6 million is available. Which projects should be accepted?
Tomodachi Co plans to invest in either Projects M or N which are described below. The company's cost of capital is 15%, the market return is 15% and the risk-free rate is 5%. The beta for project M is 1.20 and the beta for project N is 1.40. What is the NPV for Project M when using the risk-adjusted discount rate method of project evaluation? Initial Investment Project M $700,000 Project N $780,000 Year 1 $300,000 $220,000 2 $300,000 320,000 3 $300,000 380,000 4 $300,000 460,000 or You must decide firm which of the proposed projects should be accepted for the upcoming year since only $6 million is available. Which projects should be accepted?
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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Tomodachi Co plans to invest in either Projects M or N which are described below. The company's cost of capital is 15%, the market return is 15% and the risk-free rate is 5%. The beta for project M is 1.20 and the beta for project N is 1.40. What is the
|
Initial Investment |
Project M $700,000 |
Project N $780,000 |
|
Year |
|
|
|
1 |
$300,000 |
$220,000 |
|
2 |
$300,000 |
320,000 |
|
3 |
$300,000 |
380,000 |
|
4 |
$300,000 |
460,000 |
or
You must decide firm which of the proposed projects should be accepted for the upcoming year since only $6 million is available. Which projects should be accepted?
Transcribed Image Text:You must decide firm which of the proposed projects should be accepted for the upcoming
year since only $6 million is available. Which projects should be accepted?-
Project
Cost (millions)
NPV(millions)
A
3.25
0.80
В
1.75
0.52
4.5
0.69
D
3.75
0.95
E
1.25
0.25
F
0.50
0.25
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