The net present value using the adjusted present value method. Introduction: Net present value is the difference among the present value of cash outflow and present value of cash inflow for a particular period of time.

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Answer 1

Question

Chapter 18, Problem 24P

a)

Summary Introduction

To determine: The net present value using the adjusted present value method.

Introduction:

Net present value is the difference among the present value of cash outflow and present value of cash inflow for a particular period of time.

b)

Summary Introduction

To determine: The WACC and chances in WACC.

Introduction:

WACC (weighted average cost of capital) is the rate at which a firm is predicted to pay, on an average, to all the security holders in order to finance its assets.

Net present value is the difference among the present value of cash outflow and present value of cash inflow for a particular period of time.

c)

Summary Introduction

To determine: The net present value using WACC method.

Introduction:

WACC (weighted average cost of capital) is the rate at which a company is expected to pay, on an average, to all the security holders in order to finance its assets.

Net present value is the difference between the present value of cash outflow and present value of cash inflow over a specified period of time.

d)

Summary Introduction

To determine: The equity cost of capital and how it changes.

Introduction:

The unlevered cost of capital is an assessment using either an actual debt-free or hypothetical rate of return used to measure a firm’s cost to implement a particular capital project. The unlevered cost of capital must demonstrate that the project is less expensive than a levered cost of capital.

e)

Summary Introduction

To determine: The equity cost of capital, how it changes, and compare the answer with part (a).

Introduction:

The unlevered cost of capital is an assessment using either an actual debt-free or hypothetical rate of return used to measure a firm’s cost to implement a particular capital project. The unlevered cost of capital must demonstrate that the project is less expensive than a levered cost of capital.

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Esfandairi Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2,350,000. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be worthless. The project is estimated to generate $3,310,000 in annual sales, with costs of $2,330,000. Assume the tax rate is 23 percent and the required return on the project is 11 percent. What is the project's NPV? Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.

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Answer 2

Question

Chapter 18, Problem 24P

a)

Summary Introduction

To determine: The net present value using the adjusted present value method.

Introduction:

Net present value is the difference among the present value of cash outflow and present value of cash inflow for a particular period of time.

b)

Summary Introduction

To determine: The WACC and chances in WACC.

Introduction:

WACC (weighted average cost of capital) is the rate at which a firm is predicted to pay, on an average, to all the security holders in order to finance its assets.

Net present value is the difference among the present value of cash outflow and present value of cash inflow for a particular period of time.

c)

Summary Introduction

To determine: The net present value using WACC method.

Introduction:

WACC (weighted average cost of capital) is the rate at which a company is expected to pay, on an average, to all the security holders in order to finance its assets.

Net present value is the difference between the present value of cash outflow and present value of cash inflow over a specified period of time.

d)

Summary Introduction

To determine: The equity cost of capital and how it changes.

Introduction:

The unlevered cost of capital is an assessment using either an actual debt-free or hypothetical rate of return used to measure a firm’s cost to implement a particular capital project. The unlevered cost of capital must demonstrate that the project is less expensive than a levered cost of capital.

e)

Summary Introduction

To determine: The equity cost of capital, how it changes, and compare the answer with part (a).

Introduction:

The unlevered cost of capital is an assessment using either an actual debt-free or hypothetical rate of return used to measure a firm’s cost to implement a particular capital project. The unlevered cost of capital must demonstrate that the project is less expensive than a levered cost of capital.

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Answer 3

Question

Chapter 18, Problem 24P

a)

Summary Introduction

To determine: The net present value using the adjusted present value method.

Introduction:

Net present value is the difference among the present value of cash outflow and present value of cash inflow for a particular period of time.

b)

Summary Introduction

To determine: The WACC and chances in WACC.

Introduction:

WACC (weighted average cost of capital) is the rate at which a firm is predicted to pay, on an average, to all the security holders in order to finance its assets.

Net present value is the difference among the present value of cash outflow and present value of cash inflow for a particular period of time.

c)

Summary Introduction

To determine: The net present value using WACC method.

Introduction:

WACC (weighted average cost of capital) is the rate at which a company is expected to pay, on an average, to all the security holders in order to finance its assets.

Net present value is the difference between the present value of cash outflow and present value of cash inflow over a specified period of time.

d)

Summary Introduction

To determine: The equity cost of capital and how it changes.

Introduction:

The unlevered cost of capital is an assessment using either an actual debt-free or hypothetical rate of return used to measure a firm’s cost to implement a particular capital project. The unlevered cost of capital must demonstrate that the project is less expensive than a levered cost of capital.

e)

Summary Introduction

To determine: The equity cost of capital, how it changes, and compare the answer with part (a).

Introduction:

The unlevered cost of capital is an assessment using either an actual debt-free or hypothetical rate of return used to measure a firm’s cost to implement a particular capital project. The unlevered cost of capital must demonstrate that the project is less expensive than a levered cost of capital.

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Answer 4

Question

Chapter 18, Problem 24P

a)

Summary Introduction

To determine: The net present value using the adjusted present value method.

Introduction:

Net present value is the difference among the present value of cash outflow and present value of cash inflow for a particular period of time.

b)

Summary Introduction

To determine: The WACC and chances in WACC.

Introduction:

WACC (weighted average cost of capital) is the rate at which a firm is predicted to pay, on an average, to all the security holders in order to finance its assets.

Net present value is the difference among the present value of cash outflow and present value of cash inflow for a particular period of time.

c)

Summary Introduction

To determine: The net present value using WACC method.

Introduction:

WACC (weighted average cost of capital) is the rate at which a company is expected to pay, on an average, to all the security holders in order to finance its assets.

Net present value is the difference between the present value of cash outflow and present value of cash inflow over a specified period of time.

d)

Summary Introduction

To determine: The equity cost of capital and how it changes.

Introduction:

The unlevered cost of capital is an assessment using either an actual debt-free or hypothetical rate of return used to measure a firm’s cost to implement a particular capital project. The unlevered cost of capital must demonstrate that the project is less expensive than a levered cost of capital.

e)

Summary Introduction

To determine: The equity cost of capital, how it changes, and compare the answer with part (a).

Introduction:

The unlevered cost of capital is an assessment using either an actual debt-free or hypothetical rate of return used to measure a firm’s cost to implement a particular capital project. The unlevered cost of capital must demonstrate that the project is less expensive than a levered cost of capital.

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Answer 5

Chapter 18, Problem 24P

a)

Summary Introduction

To determine: The net present value using the adjusted present value method.

Introduction:

Net present value is the difference among the present value of cash outflow and present value of cash inflow for a particular period of time.

b)

Summary Introduction

To determine: The WACC and chances in WACC.

Introduction:

WACC (weighted average cost of capital) is the rate at which a firm is predicted to pay, on an average, to all the security holders in order to finance its assets.

Net present value is the difference among the present value of cash outflow and present value of cash inflow for a particular period of time.

c)

Summary Introduction

To determine: The net present value using WACC method.

Introduction:

WACC (weighted average cost of capital) is the rate at which a company is expected to pay, on an average, to all the security holders in order to finance its assets.

Net present value is the difference between the present value of cash outflow and present value of cash inflow over a specified period of time.

d)

Summary Introduction

To determine: The equity cost of capital and how it changes.

Introduction:

The unlevered cost of capital is an assessment using either an actual debt-free or hypothetical rate of return used to measure a firm’s cost to implement a particular capital project. The unlevered cost of capital must demonstrate that the project is less expensive than a levered cost of capital.

e)

Summary Introduction

To determine: The equity cost of capital, how it changes, and compare the answer with part (a).

Introduction:

The unlevered cost of capital is an assessment using either an actual debt-free or hypothetical rate of return used to measure a firm’s cost to implement a particular capital project. The unlevered cost of capital must demonstrate that the project is less expensive than a levered cost of capital.

Answer 6

Chapter 18, Problem 24P

a)

Summary Introduction

To determine: The net present value using the adjusted present value method.

Introduction:

Net present value is the difference among the present value of cash outflow and present value of cash inflow for a particular period of time.

Answer 7

Chapter 18, Problem 24P

a)

Summary Introduction

To determine: The net present value using the adjusted present value method.

Introduction:

Net present value is the difference among the present value of cash outflow and present value of cash inflow for a particular period of time.

Answer 8

b)

Summary Introduction

To determine: The WACC and chances in WACC.

Introduction:

WACC (weighted average cost of capital) is the rate at which a firm is predicted to pay, on an average, to all the security holders in order to finance its assets.

Net present value is the difference among the present value of cash outflow and present value of cash inflow for a particular period of time.

Answer 9

b)

Summary Introduction

To determine: The WACC and chances in WACC.

Introduction:

WACC (weighted average cost of capital) is the rate at which a firm is predicted to pay, on an average, to all the security holders in order to finance its assets.

Net present value is the difference among the present value of cash outflow and present value of cash inflow for a particular period of time.

Answer 10

c)

Summary Introduction

To determine: The net present value using WACC method.

Introduction:

WACC (weighted average cost of capital) is the rate at which a company is expected to pay, on an average, to all the security holders in order to finance its assets.

Net present value is the difference between the present value of cash outflow and present value of cash inflow over a specified period of time.

Answer 11

c)

Summary Introduction

To determine: The net present value using WACC method.

Introduction:

WACC (weighted average cost of capital) is the rate at which a company is expected to pay, on an average, to all the security holders in order to finance its assets.

Net present value is the difference between the present value of cash outflow and present value of cash inflow over a specified period of time.

Answer 12

d)

Summary Introduction

To determine: The equity cost of capital and how it changes.

Introduction:

The unlevered cost of capital is an assessment using either an actual debt-free or hypothetical rate of return used to measure a firm’s cost to implement a particular capital project. The unlevered cost of capital must demonstrate that the project is less expensive than a levered cost of capital.

Answer 13

d)

Summary Introduction

To determine: The equity cost of capital and how it changes.

Introduction:

The unlevered cost of capital is an assessment using either an actual debt-free or hypothetical rate of return used to measure a firm’s cost to implement a particular capital project. The unlevered cost of capital must demonstrate that the project is less expensive than a levered cost of capital.

Answer 14

e)

Summary Introduction

To determine: The equity cost of capital, how it changes, and compare the answer with part (a).

Introduction:

The unlevered cost of capital is an assessment using either an actual debt-free or hypothetical rate of return used to measure a firm’s cost to implement a particular capital project. The unlevered cost of capital must demonstrate that the project is less expensive than a levered cost of capital.

Answer 15

e)

Summary Introduction

To determine: The equity cost of capital, how it changes, and compare the answer with part (a).

Introduction:

The unlevered cost of capital is an assessment using either an actual debt-free or hypothetical rate of return used to measure a firm’s cost to implement a particular capital project. The unlevered cost of capital must demonstrate that the project is less expensive than a levered cost of capital.

Answer 16

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Answer 17

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Answer 18

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Answer 19

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The net present value using the adjusted present value method. Introduction: Net present value is the difference among the present value of cash outflow and present value of cash inflow for a particular period of time.

To determine: The net present value using the adjusted present value method. Introduction: Net present value is the difference among the present value of cash outflow and present value of cash inflow for a particular period of time.

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Chapter 18 Solutions

To determine: The net present value using the adjusted present value method.

Introduction:

Net present value is the difference among the present value of cash outflow and present value of cash inflow for a particular period of time.