PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
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Question
Chapter 19, Problem 22PS
Summary Introduction
To determine: The way the constraints changes the APV of the project.
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Use the following after-tax cash flows for project A and B to answer the next
question: (Numbers in parentheses are negative cash flows)
These two projects are independent.
Year Cash Flow of A Cash Flow of B
0
($2900)
($500)
1
$980
$100
2
$990
$100
3
$960
$800
4
$920
$100
5
($100)
($100)
What is the approximate NPV of project A if the required rate of return is 9.5%?
$128
$136
$28
$196
$163
Part B: Solve the following excersises:
1. A company is considering two mutually exclusive projects
X and Y. Each require an initial investment of OMR
100,000.The after tax cash inflows associated with each
project are as follows:
Year
Project X Cash flows Project Y Cash flows
(Initial Investment)
120,000
120,000
25,000
20,000
2
?
?
3
?
?
?
?
5
?
?
(a) Complete the table where Payback period for Project X
is 3.5 and for project Y is 4.
(b) Which project is better?
deep waters inc is using the internal rate of return (IRR) when evaluating projects. Find the IRR for the companys project. The initial outlay for the project is $473, 700. The project will produce the following after tax cash inflows of year I 156,400, year 2- 120,600, year 3 155,700, year 4 178,900 round the answer to two decimal places in percentage form
Chapter 19 Solutions
PRIN.OF CORPORATE FINANCE
Ch. 19.A - The U.S. government has settled a dispute with...Ch. 19.A - You are considering a five-year lease of office...Ch. 19 - WACC True or false? Use of the WACC formula...Ch. 19 - WACC The WACC formula seems to imply that debt is...Ch. 19 - Prob. 3PSCh. 19 - Prob. 4PSCh. 19 - WACC Whispering Pines Inc. is all-equity-financed....Ch. 19 - WACC Table 19.3 shows a book balance sheet for the...Ch. 19 - WACC Table 19.4 shows a simplified balance sheet...Ch. 19 - Prob. 8PS
Ch. 19 - WACC Nevada Hydro is 40% debt-financed and has a...Ch. 19 - Flow-to-equity valuation What is meant by the...Ch. 19 - APV True or false? The APV method a. Starts with a...Ch. 19 - APV A project costs 1 million and has a base-case...Ch. 19 - APV Consider a project lasting one year only. The...Ch. 19 - APV Digital Organics (DO) has the opportunity to...Ch. 19 - Prob. 17PSCh. 19 - Prob. 18PSCh. 19 - Prob. 19PSCh. 19 - Prob. 20PSCh. 19 - Prob. 22PSCh. 19 - Company valuation Chiara Companys management has...Ch. 19 - Prob. 26PSCh. 19 - Prob. 27PS
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