Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
12th Edition
ISBN: 9781259144387
Author: Richard A Brealey, Stewart C Myers, Franklin Allen
Publisher: McGraw-Hill Education
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Chapter 19, Problem 6PS
APV* A project costs $1 million and has a base-case
- a. If the firm invests, it has to raise $500,000 by a stock issue. Issue costs are 15% of net proceeds.
- b. If the firm invests, there are no issue costs, but its debt capacity increases by $500,000. The
present value of interest tax shields on this debt is $76,000.
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A project costs $1 million and has a base-case NPV of exactly zero (NPV = 0). (A negative answer should be indicated by a minus sign. Enter your answers in dollars, not millions of dollars.) a. If the firm invests, it has to raise $670,000 by a stock issue. Issue costs are 19.25% of net proceeds. What is the project’s APV?
b. If the firm invests, there are no issue costs, but its debt capacity increases by $670,000. The present value of interest tax shields on this debt is $93,000. What is the project’s APV?
A project costs $1 million and has a base-case NPV of exactly zero (NPV = 0).
Note: A negative answer should be indicated by a minus sign. Enter your answers in dollars, not millions of dollars.
a. If the firm invests, it has to raise $540,000 by a stock issue. Issue costs are 15.85% of net proceeds. What is the
project's APV?
b. If the firm invests, there are no issue costs, but its debt capacity increases by $540,000. The present value of interest
tax shields on this debt is $80,000. What is the project's APV?
a. Adjusted present value
b. Adjusted present value
A project costs $1 million and has a base-case NPV of exactly zero (NPV = 0). Note: A negative answer should be indicated by a minus sign. Enter your answers in dollars, not millions of dollars. If the firm invests, it has to raise $680,000 by a stock issue. Issue costs are 19.45% of net proceeds. What is the project’s APV? If the firm invests, there are no issue costs, but its debt capacity increases by $680,000. The present value of interest tax shields on this debt is $94,000. What is the project’s APV?
Chapter 19 Solutions
Principles of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
Ch. 19.A - The U.S. government has settled a dispute with...Ch. 19.A - Prob. 2QCh. 19 - Prob. 1PSCh. 19 - Prob. 2PSCh. 19 - WACC True or false? Use of the WACC formula...Ch. 19 - Flow-to-equity valuation What is meant by the...Ch. 19 - APV True or false? The APV method a. Starts with a...Ch. 19 - APV A project costs 1 million and has a base-case...Ch. 19 - Prob. 7PSCh. 19 - APV Consider a project lasting one year only. The...
Ch. 19 - WACC The WACC formula seems to imply that debt is...Ch. 19 - Prob. 10PSCh. 19 - Prob. 11PSCh. 19 - WACC Table 19.4 shows a simplified balance sheet...Ch. 19 - WACC How will Rensselaer Felts WACC and cost of...Ch. 19 - APV Digital Organics (DO) has the opportunity to...Ch. 19 - APV Consider another perpetual project like the...Ch. 19 - Prob. 18PSCh. 19 - Prob. 19PSCh. 19 - Prob. 22PSCh. 19 - Company valuation Chiara Companys management has...Ch. 19 - Prob. 25PSCh. 19 - Prob. 26PS
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