Hi expart solve this accounting question You are the manager of a financially distressed corporation with $10 millionin debt outstanding that will mature in one month. Your firm currently has $7million cash on hand. Assume that you are offered the opportunity to investin either of the following two projects.Project 1: The opportunity to invest $7 million in risk-free Treasury bills witha 4% annual interest rate (or a 0.333% monthly interest rate).Project 2: A high-risk gamble that will pay $12 million in one month if it issuccessful (probability 5 0.25) but will pay only $4,000,000 if it is unsuccessful(probability 5 0.75).Compute the expected payoff for each project. Which one you would adoptif you were operating the firm in the shareholders' best interests? Why?

Step 1: Define Outstanding DebtOutstanding debt is the sum of the principle and the interest which…

Answered: You are the manager of a financially…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter11: Capital Budgeting And Risk

Section: Chapter Questions

Problem 28P

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You are a consultant to a firm evaluating an expansion of its current business. The cash-flow forecasts (in millions of dollars) for the project are as follows: Years Cash Flow 100 1-10 14 On the basis of the behavior of the firm's stock, you believe that the beta of the firm is 1.41. Assuming that the rate of return available on risk-free investments is 5% and that the expected rate of return on the market portfolio is 13%, what is the net present value of the project? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer in millions of dollars rounded to 2 decimal places.) Net present value million
Please show the solution in excel format :) thank you
You are a consultant to a firm evaluating an expansion of its current business. The cash-flow forecasts (in millions of dollars) for the project are as follows: Years 0 1-10 Cash Flow -100 +16 On the basis of the behavior of the firm's stock, you believe that the beta of the firm is 1.33. Assuming that the rate of return available on risk-free investments is 6% and that the expected rate of return on the market portfolio is 15%, what is the net present value of the project? Note: Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer in millions of dollars rounded to 2 decimal places.

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