An all-equity firm is considering the following projects: Project W X Y Z Beta .54 .91 1.09 1.83 IRR 10.1% 10.6 14.1 17.1 The T-bill rate is 5.1 percent, and the expected return on the market is 12.1 percent. a. Which projects have a higher/lower expected return than the firm's 12.1 percent cost of capital?
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I forgot to include the other two questions. This question has a B & C. Please help me solve those in excel as well. I have provided original question and additional questions
- Start with the partial model in the file Ch15 P13 Build a Model.xlsx on the textbook’s Web site. Reacher Technology has consulted with investment bankers and determined the interest rate it would pay for different capital structures, as shown in the following table. Data for the risk-free rate, the market risk premium, an estimate of Reacher’s unlevered beta, and the tax rate are also shown. Reacher expects zero growth. Based on this information, what is the firm’s optimal capital structure, and what is the weighted average cost of capital at the optimal structure?5. 12.07 56 eBook Huang Industries is considering a proposed project whose estimated NPV is $12 million. This estimate assumes that economic conditions will be "average." However, the CFO realizes that conditions could be better or worse, so she performed a scenario analysis and obtained these results: Economic ScenarioProbability of Outcome NPV Recession 0.05 0.20 0.50 12 million 0.20 18 million 0.05 28 million Calculate the project's expected NPV, standard deviation, and coefficient of variation Enter your answers for the project's expected NPV and standard deviation in millions. For example, an answer of $13,000,000 should be entered as 13. Do not round intermediate calculations. Round your answers to two decimal places. Below average Average Above average Boom E(NPV): ONPV: CV: million million ($32 million) (12 million)An all-equity firm is considering the following projects: Project Beta IRR W .58 X .87 Y 1.13 Z 1.47 9.0% 9.7 12.1 15.2 The T-bill rate is 4.2 percent and the expected return on the market is 11.2 percent. a. Compared with the firm's 11.2 percent cost of capital, Project W has a expected return, Project Y has a expected return. expected return, Project X has a expected return, and Project Z has a
- answer #2 please inl Year 6 7 Currently, the investor's required rate of return 8 9 Please compute the project's NPV (hint: it is positive). 10 1 What if interest rates in the broad economy went up. 2 and also the firm became riskier? Investors would 323 1234 3 require a higher rate of return. 24 32 Cash Flows -5,881 1,551 1,635 1,722 2,029 25 1. Suppose the required rate increases 2%. 26 How much would the NPV drop? 27 A Between 200 and 270 28 B Between 270 and 280 29 C Between 280 and 290 30 D Between 290 and 300 31 33 34 35 2. Should the firm still accept the project? 36 A Yes 37 B No 6.0%rome =16 MENT I You are considering investing in a project with the following possible outcomes: Probability of Investment Returns States Осcurrence Economic Boom 15% 16% Economic Growth 45% 12% Economic Decline 25% 5% Depression 15% -10% Calculate the standard deviation for this investment. Select one: O a. 6.46% O b. 8.21% O C. 10.07% O d. 11.17% O e. 11.63% bp 近11-25 Firmwide versus Project-Specific WACCS An all-equity firm is considering the projects shown below. The T-bill rate is 4 percent and the market risk premium is 7 percent. If the firm uses its current WACC of 12 percent to evaluate these projects, which project(s), if any, will be incorrectly rejected? (LG11-6) Project Expected Return Beta A 8.0% 0.5 19.0 1.2 C 13.0 1.4 17.0 1.6
- Problem 9-16 Problems with Profitability Index [LO1, 7] The Michner Corporation is trying to choose between the following two mutually exclusive design projects: Vear Cash Flow (0) Cash Flow ( -24 63,000 32,000 32,000 32,000 -$ 18,100 9,750 9,750 9,750 3 a-1.If the required return is 11 percent, what is the profitability index for both projects? (Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161.) Project I Project I| a- If the company applies the profitability index decision rule, which project should the 2. firm accept? O ProjectI O Project I b- What is the NPV for both projects? (A negative answer should be indicated by a 1. minus sign. Do not round Intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Project i Project I b- if the company applies the NPV decision rule, which project should it take? 2. Project I O Project IQ.8 Royal Paints Limited is an all-equity frimwithout any debt. It has a beta of 1.21. The current risk free rate is 8.5% and the historical market premium 9.5%. Royal is considering a project that is expected to generate a return of 20%. Assuming that the project has the same risk as the firm, should the accept the project?Problem 9-21 Suppose the rate of return on short-term government securitles (percelved to be risk-free) Is about 6%. Suppose also that the expected rate of return requlred by the market for a portfolio with a beta of 1 Is 15%. According to the capital asset pricing model: a. What Is the expected rate of return on the market portfolo? (Round your answer to 2 decimal places.) Expected rate of return b. What would be the expected rate of return on a stock with B = 0? (Round your answer to 2 declimal places.) Expected rate of return % c. Suppose you consider buylng a share of stock at $54. The stock Is expected to pay $4 dividends next year and you expect It to sell then for $56. The stock risk has been evaluated at ß = -.5. Is the stock overpriced or underpriced? O Underpriced Overpriced
- QUESTION 15 If you invest $45,000 in the market index and $30,000 in a risk free investment what is the beta risk of your investment? O 0.30 O 0.40 O 0.45 0.60Problem 8-14 Problems with Profitability Index [LO 4, 6] The Michner Corporation is trying to choose between the following two mutually exclusive design projects: Year Cash Flow (I) Cash Flow (II) 0 −$ 82,000 −$ 40,000 1 32,000 13,200 2 42,000 29,500 3 48,000 22,500 a-1. If the required return is 15 percent, what is the profitability index for each project? Note: Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161. a-2. If the company applies the profitability index decision rule, which project should it take? b-1. If the required return is 15 percent, what is the NPV for each project? Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. b-2. If the company applies the net present value decision rule, which project should it take?Question 1 A firm is assessing a project's BTCF for year 3. It has developed three estimates for BTCF in today's dollars, the likely amount, a high amount and a low amount, each with an associated probability. Annual inflation could be low at 3% or high at 8%. The firm estimates low inflation to have a 80% likelihood. BTCF (today's $) Probability Low 150,000 0.3 Most Likely 180,000 0.6 High 200,000 0.1 What is the expected BTCF for year 3 of the project tn actual dollars? O $179,920 O $187,117 O $194,819 $202.843 A firm is assessing a projects BTCF for year 3. It has developed three estimates for BTCF in todays dollars, the likely amount, a high amount, and a low amount, each with an associated probability. Annual inflation could be low at 3% or high at 8%. The firm estimates low inflation to have a 80% likelihood. What is the expected BTCF for year 3 of the project in actual dollars?