Midwest Water Works estimates that its WACC is 10.44%. The company is considering the following capital budgeting projects. Assume that each of these projects is just as risky as the firm's existing assets and that the firm may accept all the projects or only some of them. Which set of projects should be accepted? Project Size Rate of Return A $1 million 12.0% |-Select- 2 million 11.5 |-Select- 2 million 2 million 1 million C 11.2 |-Select- D 11.0 -Select- 10.7 -Select- F 1 million 10.3 |-Select- 1 million 10.2 |-Select-

Midwest Water Works estimates that its WACC is 10.44%. The company is considering the following capital budgeting projects. Assume that each of these projects is just as risky as the firm's existing assets and that the firm may accept all the projects or only some of them. Which set of projects should be accepted? Project Size Rate of Return A $1 million 12.0% |-Select- 2 million 11.5 |-Select- 2 million 2 million 1 million C 11.2 |-Select- D 11.0 -Select- 10.7 -Select- F 1 million 10.3 |-Select- 1 million 10.2 |-Select-

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Suppose a company has the following three projects and limits its capital budget to $50000. Projects Present Value of Cash Inflows Initial Investment A $40000 $25000 В 37500 25000 70000 50000 1. Calculate the projects' net present values (NPVS). 2. Calculate the projects' profitability indexes (PIs). 3. Which project(s) should the company choose? Why?
Midwest Water Works estimates that its WACC is 10.45%. The company is considering the following capital budgeting projects. Assume that each of these projects is just as risky as the firm's existing assets and that the firm may accept all the projects or only some of them. Which set of projects should be асcсepted? Project Size Rate of Return А $1 million 12.0% -Select- В 2 million 11.5 -Select- 2 million 11.2 -Select- 2 million 11.0 -Select- E 1 million 10.7 -Select- F 1 million 10.3 -Select- 1 million 10.2 -Select-
Consider the following information for Smart Products: total assets P1000; sales-P1540; net profit margin-12%; dividend payout ratio=40%; accounts payable=P308. If sales are forecast to increase 30%, the "short cut" estimate of external funds required (EFR) would be P________?
H1. Optimal Capital Budgeting (Capital Expenditure valuations) Dandy Panda´s Japan affiliated company presents a capital structure which is also its target capital structure, which calls for 50% debt and 50’% common equity. Tokyo´s manufacturing has only one (1) potential project, an expansion program with a 10.2% IRR and a cost of USD 20 million. However, the project is completely divisible, that is Panda´s directors can decide to invest any amount up to USD 20 million. Tokyo expects to retain $3 million of earnings next year. It can raise debt at a pre-tax annual cost of 10%. The cost of the retained earnings in the Balance sheet would be 12% per year. Dandy Panda Japan can sell new stock at a constant cost of new equity of 15%. Japan has a marginal tax rate of 40% What is Dandy Panda´s Japan optimal Capital Budget to be calculated by the Company between zero and USD 20 million?
nas Darin Clay, the CFO of MakeMoney.com, has to decide between the following two projects: Year 0 1 2 3 Project Million -$1,800 +220 1,020 1,500 Project Billion -$10 10 + 700 1,500 2,200 The expected rate of return for either of the two projects is 12 percent. What is the range of initial investment (o) for which Project Billion is more financially attractive than Project Million? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Initial investment
Compute the NPV statistic for Project Y. Explain whether or not the firm should accept or reject the project with the cash flows shown in the chart below if the appropriate cost of capital is 10%. Year 0 = -8,000, year 1 = 3,350, Year 2 = 4,180, Year 3 = 1,520, Year 4 = $300
Midwest Water Works estimates that its WACC is 10.5%. The companyis considering the following capital budgeting projects:Project Size Rate of ReturnA $1 million 12.0%B 2 million 11.5C 2 million 11.2D 2 million 11.0E 1 million 10.7F 1 million 10.3G 1 million 10.2Assume that each of these projects is just as risky as the firm’s existing assets and thatthe firm may accept all the projects or only some of them. Which set of projects should beaccepted? Explain.
A firm evaluates all of its projects by applying the IRR rule. A project under consideration has the following cash flows: Year Cash Flow -$ 27,600 11,600 14,600 10,600 1 2 If the required return is 18 percent, what is the IRR for this project? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) IRR % Should the firm accept the project? O No Yes eBook & Resources eBook: 9.5. The Internal Rate of Return Check my work 00
Consider the investment project with net cash flows shown. There are 2 rates of return for the project. One is 43.47%. What is the other? Enter as a percentage without the percent sign. For instance, if your answer is 10.23%, enter as 10.23. n Net Cash Flow 0 -$8000 1 $10000 2 $30000 3 -$40000
A firm evaluates all of its projects by applying the IRR rule. A project under consideration has the following cash flows: Year Cash Flow 0 $27,700 1 11,700 14,700 3 10,700 If the required return is 18 percent, what is the IRR for this project? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) IRR % Should the firm accept the project? Yes No
6. a. A project has an investment proposal with the following characteristics:Period Cash outflows Cash inflows0 Tk. 10,000 -1 12,000 -2 - Tk. 12,0003 - 10,000Compute the project’s profitability index using hurdle rate of 5 percent. Decidewhether the project is acceptable or not. 05b. ‘Gilford Mild Company’ is considering new product line to supplement its rangeline. It is anticipated that the new line will involve cash investment of Tk.500,000 at the initial time period and Tk. 600,000 in the 1st year. After-tax cashinflows of Tk. 400,000 are expected in the 2nd year and Tk. 500,000 each yearthereafter through the 11th year. While the product line might be viable after the11th year, the company prefers to be conservative and calculates at that time.Determine IRR. Is the project acceptable if hurdle rate is 14 percent?
XYZ Corporation is considering a capital budgeting project and requires a detailed analysis. The company has provided youwith the following financial information and ratios:Return on Investment (ROI): 15%Payback Period: 3 yearsNet Present Value (NPV): R50,000Internal Rate of Return (IRR): 12%Cash Flows:Year 1: R20 000Year 2: R30 000Year 3: R40 0001.4 Calculate the ARR for XYZ Corporation. Assume depreciation is calculated on the straight-linemethod and that the project has a scrap value of R5000

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