Principles of Managerial Finance, Student Value Edition Plus NEW MyLab Finance with Pearson eText -- Access Card Package (14th Edition)
Principles of Managerial Finance, Student Value Edition Plus NEW MyLab Finance with Pearson eText -- Access Card Package (14th Edition)
14th Edition
ISBN: 9780133740912
Author: Lawrence J. Gitman, Chad J. Zutter
Publisher: PEARSON
Question
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Chapter 10, Problem 10.12P

a)

Summary Introduction

To determine: The Payback period of each project.

Introduction:

Every investment requires a time period to pay back the cost of investment. The time period taken to recover the cost of an investment is known as the payback period.

b)

Summary Introduction

To determine: The Net Present Value for each project.

Introduction:

The difference between the present value of cash inflows and the present value of cash outflows over a period of time is known as the Net Present value.

c)

Summary Introduction

To determine: The recommendations of the projects.

Introduction:

Every investment requires a time period to pay back the cost of investment. The time period taken to recover the cost of an investment is known as the payback period. The difference between the present value of cash inflows and the present value of cash outflows over a period of time is known as the Net Present value.

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Question 5 1 The common shares of Almond Beach Inc, have a beta of 0.75, offer a return of 9%, and have an historical standard deviation of return of 17%. Alternatively, the common shares of Palm Beach Inc. have a beta of 1.25, offer a return of 10%, and have an historical standard deviation of return of 13%. Both firms have a marginal tax rate of 37%. The risk-free rate of return is 3% and the expected rate of return on the market portfolio is 9½%%. 1. Which company would a well-diversified investor prefer to invest in? Explain why and show all calculations. 2. Which company Would an investor who can invest in the shares of only one firm prefer to invest in? Explain why. Use the following template to organize and present your results: Theoretical CAPM Actual offered Almond Beach Inc. Palm Beach Inc. prediction for expected return (%) return (%) Standard deviation of return (%) Beta Comments on the diversified investor's choice Comments on the individual investor's choice
solve this question by using appropriate methodology and true answer.
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Principles of Managerial Finance, Student Value Edition Plus NEW MyLab Finance with Pearson eText -- Access Card Package (14th Edition)

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