A Company intends to establish a new Project named (A) beside its current project (E). The table below shows NPVS, E(NPV), and Standard Deviation of the Company's current project (E) and the new project (A) according to economic status. Calculate the Coefficient of Correlation between (t) and (A) (EA) Economy Status NPV of Project (E) NPV of Project (A) Bust Normal Growth Boom (NPV) Standard Deviation PI 0.2 0.35 0.45 2,500 5,300 5,500 4,830 1,168.375 400 950 1,600 1,132.5 466.175

A Company intends to establish a new Project named (A) beside its current project (E). The table below shows NPVS, E(NPV), and Standard Deviation of the Company's current project (E) and the new project (A) according to economic status. Calculate the Coefficient of Correlation between (t) and (A) (EA) Economy Status NPV of Project (E) NPV of Project (A) Bust Normal Growth Boom (NPV) Standard Deviation PI 0.2 0.35 0.45 2,500 5,300 5,500 4,830 1,168.375 400 950 1,600 1,132.5 466.175

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter7: Corporate Valuation And Stock Valuation

Section: Chapter Questions

Problem 11MC

See similar textbooks

Similar questions

A firm’s sustainable growth rate can be calculated using the formula Sustainable growth rate = (p(S/A)(1 + D/E) x R) / [1 – (p(S/A)(1 + D/E) x R)] Discuss the relationship between sustainable growth rate and each of the four variables in the above formula
How would an increase in each of the following factors affect the AFN?1. Payout ratio2. Capital intensity ratio, A0*/S03. Profit margin4. Days sales outstanding, DSO5. Sales growth rateIs it possible for the AFN to be negative? If so, what would this indicate?If excess capacity exists, how would that affect the calculated AFN?
Based on the information below which projects will we choose based on weighted average profitabiltity Index if we only have OMR500,000 to invest? Project NPV Investment PI A 130,000 200,000 B 241,250 225,000 C 294,250 275,000 D 262,000 250,000 Select one: a. WAPI AD b. WAPI AB c. WAPI BD d. WAPI BC
The table below shows the internal rate of return (IRR%) for three investment projects A, B and C and their differences. According to capital investment A С>В b. A>B>C C. C>B>A d. B>C>A е. С>А>В
Answer the following questions based on the given information from table of probability distributions and rate of return investment of two companies namely; Celecom Bhd. and Pos Selaju Bhd. shares below: Table 2: Probability distributions and rate of returns for Celecom Bhd. and Pos Selaju Bhd. State of Economy Probability of the States Return (%) Celecom Bhd. Return (%) Pos Selaju Bhd. Boom Normal Recession 0.30 0.50 0.20 25 20 15 40 10 20 (i) Solve for the expected rate of return for Celecom Bhd. and Pos Selaju Bhd. shares. (ii) In your opinion, which share is more worth the profit for investment and why?
Give typing answer with explanation and conclusion 27. EFN Define the following: S = Previous year’s sales A = Total assets E = Total equity g = Projected growth in sales PM = Profit margin b = Retention (plowback) ratio Assuming that all debt is constant, show that EFN can be written as EFN = −PM(S)b + [A − PM(S)b] × g Hint: Asset needs will equal A × g. The addition to retained earnings will equal PM(S)b × (1 + g).
Assume that the following ratios are constant. Total asset turnover 1.37, profit margin 6.9%, equity multiplier 1.7, payout ratio 57%. What is the sustainable growth rate?
Profitability index. Given the discount rate and the future cash flow of each project listed in the following table, . use the Pl to determine which projects the company should accept. What is the Pl of project A? i Data Table (Round to two decimal places.) (Click on the following icon o in order to copy its contents into a spreadsheet.) Cash Flow Project A -%241,900,000 $150,000 $350,000 Project B Year 0 $2,300,000 $1,150,000 $950 000 $750,000 $550,000 Year 1 Year 2 Year 3 $550,000 Year 4 $750,000 $950,000 4% Year 5 $350.000 Discount rate 18% Print Done
If a company's required rate of return is 8%, and in using the profitability index method, a project's index is greater than 1, this indicates that the project's rate of return is less than 8%. greater than 8%. O unacceptable for investment purposes. equal to 8%.
Astrazeneca plc has furnished Profitability Indexes for its different projects below: ProjectRis -2; Project S is 3; Project T is -3, and Project U is 5. Which of the above projects should be accepted as per Profitability Index Rule for AstraZeneca plc? a. Project R & T O b. Project T & U O c. Project R & S O d. Project S & U
. There are three possible states of economy-Boom, Growth or Recession and the returns on Ihser and Resque depend on which state will occur.T he details for these projects are as follows: State of the economy Probability of the state of the economy occurring Ihser(%) Resque(%) Boom 0.25 40 10 Growth 0.55 30 15 Recession 0.20 -10 20 (a) Calculate the expected return and standard deviation for each project (b) What are the covariance and correlation coefficient between returns of Ihser and Resque
Use the information below to calculate WACC given the Market Capitalization of the company: Market Cap = 193.2 Million EBIT = 17.2 Million Depreciation = 4.2 Million Capital Expenditures = - 3.8 Million Change in W/C = 2.1 Million growth = 7% FCF = ? WACC = ?