(a) A company has a 12% WACC. One of its core divisions is considering two mutually exclusive investments with the net cash flows given below. The division’s beta is βDIV = 1.6, risk free rate is kRF = 7% and risk-premium on the market is RPM = 6% Given the information above, you are required to answer the followings: i. What is each project’s Payback and discounted payback periods and interpret these numbers? ii. What is each project’s NPV? iii. What is each project’s IRR?
Q-2.
(a)
A company has a 12% WACC. One of its core divisions is considering two mutually exclusive investments with the net cash flows given below. The division’s beta is βDIV = 1.6, risk free rate is kRF = 7% and risk-premium on the market is RPM = 6%
Given the information above, you are required to answer the followings:
i. What is each project’s Payback and discounted payback periods and interpret these numbers?
ii. What is each project’s
iii. What is each project’s
iv. What is each project’s MIRR?
v. From your answers to Parts a, b, c and d, which project would be selected?
vi. What is each project’s profitability index?
vii. What is difference between mutually exclusive and independent projects?
viii. List the characteristics of a good capital budgeting technique.
ix. Briefly explain the acceptance and rejection criteria for each technique regarding mutually exclusive and independent projects.
(b)
Kindly Provide brief answers to the following:
i. What is the difference between systematic and unsystematic risk?
ii. What is strategic business plan and why it is important for the success of a firm? Explain in your own words.
iii. Explain for which types of projects, a detailed capital budgeting analysis is required and why?
iv. What do you mean from
v. How can we check whether a firm is paying its creditors well in time?
vi. Why do we add floatation costs in the calculations of individual components costs?
vii. List and briefly explain the qualitative and quantitative factors considered for ratio analysis.
(c)
Ali Brothers has a Days Sales Outstanding of 46 days, and its annual sales are $5,700,000. What are its accounts receivable balance? Assume that it uses a 360-day year.
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