FINANCE1A9th Question 7. A firm has 60% of debt and 40% of equity as its capital. The cost of debt is 8%, the cost of equity is 15%, and the tax rate is 35%. Determine the firm'scost of capital.O 7.02%9.12%10.80%13.80%8. A firm is considering a project requiring an investment of $27,000. The project would generate an annual cash flow of $6,296 for the next seven years.The company uses the straight-line method of depreciation. The approximate internal rate of return for the project is6.00%8.00%12.00%14.00%9. Individual R is considering two investments. Each will cost $20,000 initially. Project 1 will return annual cash flows of $10,000 in each of three years.Project 2 will return $5,000 in year 1, $10,000 in year 2, and $15,000 in year 3. Roman requires a minimum rate of return of 10%. What is the NPV ofProject 1, Project 2,? Which project must be selected? (round off to the nearest tens).O $20,000; $20,220; Project 2$25,670; $24,520; Project 2$4,870; $4,080; Project 1$22,530; $22,510; Project 1

7. Weighted Average Cost of Capital = kd *Wd + Ke*We where Kd is Cost of Capital Ke Cost of…

9. Individual R is considering two investments. Each will cost $20,000 initially. Project 1 will return annual cash flows of $10,000 in each of three years. Project 2 will return $5,000 in year 1, $10,000 in year 2, and $15,000 in year 3. Roman requires a minimum rate of return of 10%. What is the NPV of Project 1, Project 2,? Which project must be selected? (round off to the nearest tens). $20,000; $20,220; Project 2 O $25,670; $24,520; Project 2 $4,870; $4,080; Project 1 $22,530; $22,510; Project 1

9. Individual R is considering two investments. Each will cost $20,000 initially. Project 1 will return annual cash flows of $10,000 in each of three years. Project 2 will return $5,000 in year 1, $10,000 in year 2, and $15,000 in year 3. Roman requires a minimum rate of return of 10%. What is the NPV of Project 1, Project 2,? Which project must be selected? (round off to the nearest tens). $20,000; $20,220; Project 2 O $25,670; $24,520; Project 2 $4,870; $4,080; Project 1 $22,530; $22,510; Project 1

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 21P: Your division is considering two investment projects, each of which requires an up-front expenditure...

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Your division is considering two investment projects, each of which requires an up-front expenditure of 25 million. You estimate that the cost of capital is 10% and that the investments will produce the following after-tax cash flows (in millions of dollars): a. What is the regular payback period for each of the projects? b. What is the discounted payback period for each of the projects? c. If the two projects are independent and the cost of capital is 10%, which project or projects should the firm undertake? d. If the two projects are mutually exclusive and the cost of capital is 5%, which project should the firm undertake? e. If the two projects are mutually exclusive and the cost of capital is 15%, which project should the firm undertake? f. What is the crossover rate? g. If the cost of capital is 10%, what is the modified IRR (MIRR) of each project?
A project requires an initial investment of $500,000. This project will generate a future cash flow of $100,000/year for 8 years. The WACC of the firm is 8%. The cost of equity of this firm is 12%. The cost of debt of this firm is 6%. The risk-free rate is 3%. The floatation cost of equity is 4%. The floatation cost of debt is 2%. The target debt-to-equity ratio is 0.5. What is the NPV of this project?
A firm is considering investing in a project that is expected to generate total free cash flows of $58 million next year. After that they are expected to grow at 1.0%. To finance this project the firm will maintain a constant 65% of the firm value as debt, has a cost of capital of the firm's assets of 7.5%, corporate tax rate of 35%, and cost of debt capital of 4.7%. What is the value of this project? Round your answer to the nearest million-so for example $187,103,202.338 would be "187".
Suppose Alcatel-Lucent has an equity cost of capital of 10%, market capitalization of $10.8 billion, and an enterprise value of $14.4 billion. Suppose Alcatel-Lucent’s debt cost of capital is 6.1% and its marginal tax rate is 35%. The cash flow for the project is as follows, same as was given in the previous question. Year 0 1 2 3 FCF -100 50 100 Calculate FCFE for each year but only answer: What is the Percentage change in FCFE in Year 2 from Year 1? Please give your answer in Percentage up to 2 places of Decimal without giving the % sign.
AAA Inc. is evaluating a project that will require $500,000 in assets. The project is financed with equity only and is expected to generate earnings before interest and taxes of $90,000. The firm has a tax rate of 16%. What is the ROE (return on equit for this project? a. 16.00% b. 18.15% O c. 10.75% O d. 15.12%
Company XYZ is considering an investment project that is expected to generate the following cash flows: Year 1: $500,000 Year 2: $700,000 Year 3: $800,000 Year 4: $900,000 Year 5: $1,200,000 The cost of capital for the company is 10%. Calculate the Firm's Present Value (FPV) of the cash flows. To calculate the Firm's Present Value (FPV) of the cash flows, you need to discount each cash flow to its present value using the cost of capital, and then sum up the present values of all cash flows.
An unlevered firm has a cost of equity capital of 10%. The firm will invest in a project that will give a one- time cash flow of $33,000 after one year. A levered firm invests in the same project as the unlevered firm. What is the value of the levered value with perfect capital markets? $24,000 $30,000 $36,600 $36.000
In an effort to increase its customer base, a company set the project MARR at exactly the WACC. If equity capital costs 8% per year and debt capital costs 12.5% for the project, what is the equity-debt percentage mix of capital required to make the WACC = 10%?
A project requires a net investment of $100,000. At the firm's cost of capital of 10%, the project's profitability index is 1.15. (a)Determine the net present value of the project.(b) An investment project requires a net investment of $100,000. The project is expected to generate annual net cash inflows of $28,000 for the next 5 years. The firm's cost of capital is 12%. Determine the internal rate of return for the project (to the nearest tenth of one percent).
The Sugar Cookie Company needs to raise $200 million for a project. If external financing is used, the firm faces flotation costs of 6% for equity and 3% for debt. If the project is financed 60% with equity and 40% with debt, how much cash must the firm raise in order to finance the project? O A. O B. O C. O D. OE. $212.31 million $175.16 million $161.57 million $210.08 million $209.42 million
The Seattle Corporation has been presented with an investment opportunity that will yield end of year cash flows of $30,000 in Year 1, $35,000 per year in years 2 and 3, $45,000 in year 4, and $50,000 in year 5. Thus investment will cost the firm $135,000 today, and the firms cost of capital is 13%. What is the firm’s NPV for this investment?
In an effort to increase its customer base, a company set the project MARR at exactly the WACC. If equity capital costs 8% per year and debt capital costs 12.5% for the project, what is the equity-debt percentage mix of capital required to make the WACC = 10%? % equity and [ The mix is % debt capital.