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with the $440,000 investment which company would you prefer to invest

with the $440,000 investment which company would you prefer to invest

Essentials Of Investments
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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Your company has $440,000 to invest in one of the following: Company 1: You are determining whether to purchase another company or firm. A firm has projected free cash flows of $30,000 for Year 1, $50,000 for Year 2, 80,000 for Year 3, 110,000 for Year 4, and 130,000 for Year 5. The projected terminal value at the end of Year 5 is $300,000. The firm's Weighted Average cost of Capital (WACC) is 12.0%. $440,000 Investment. Company 2: You are determining whether to purchase another company or firm. A firm has projected free cash flows of $40,000 for Year 1, $60,000 for Year 2, 80,000 for Year 3, 100,000 for Year 4, and 120,000 for Year 5. The projected terminal value at the end of Year 5 is $300,000. The firm's Weighted Average cost of Capital (WACC) is 12.0%. $440,000 Investment. Based only on your calculation of DCF with the $440,000 investment which company would you prefer to invest
Transcribed Image Text:Your company has $440,000 to invest in one of the following: Company 1: You are determining whether to purchase another company or firm. A firm has projected free cash flows of $30,000 for Year 1, $50,000 for Year 2, 80,000 for Year 3, 110,000 for Year 4, and 130,000 for Year 5. The projected terminal value at the end of Year 5 is $300,000. The firm's Weighted Average cost of Capital (WACC) is 12.0%. $440,000 Investment. Company 2: You are determining whether to purchase another company or firm. A firm has projected free cash flows of $40,000 for Year 1, $60,000 for Year 2, 80,000 for Year 3, 100,000 for Year 4, and 120,000 for Year 5. The projected terminal value at the end of Year 5 is $300,000. The firm's Weighted Average cost of Capital (WACC) is 12.0%. $440,000 Investment. Based only on your calculation of DCF with the $440,000 investment which company would you prefer to invest
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