CORPORATE FINANCE ACCESS CARD
CORPORATE FINANCE ACCESS CARD
12th Edition
ISBN: 2810023360184
Author: Ross
Publisher: MCG
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Chapter 2, Problem 12QAP

Financial Cash Flows The Stancil Corporation provided the following current information:

Chapter 2, Problem 12QAP, Financial Cash Flows The Stancil Corporation provided the following current information: Determine

Determine the total cash flows spent on fixed assets and NWC. What are the cash flows to investors of the firm?

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Scenario one: Under what circumstances would it be appropriate for a firm to use different cost of capital for its different operating divisions? If the overall firm WACC was used as the hurdle rate for all divisions, would the riskier division or the more conservative divisions tend to get most of the investment projects? Why? If you were to try to estimate the appropriate cost of capital for different divisions, what problems might you encounter? What are two techniques you could use to develop a rough estimate for each division’s cost of capital?
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