Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
4th Edition
ISBN: 9780134083278
Author: Jonathan Berk, Peter DeMarzo
Publisher: PEARSON
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Textbook Question
Chapter 19, Problem 5P
Under the assumptions that Ideko’s market share will increase by 0.5% per year (implying that the investment, financing , and depreciation will be adjusted as described in Problems 3 and 4) and that the
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GTO Incorporated is considering an investment costing $210,720 that results in net cash flows of $30,000 annually for 10 years.
(PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)
(a) What is the internal rate of return of this investment?
(b) The hurdle rate is 8.5%. Should the company invest in this project on the basis of internal rate of return?
Answer is complete but not entirely correct.
a. Internal rate of return
8 × %
b. Should the company invest in this project on the basis of internal rate of return?
No
Woc inc. wants to increase its free cash flow by PIBO milion during the coming year, which should
result in a higher EVA and stock price. The CO has made these projections for the upcoming year:
• CBIT Is projected to equal PRSO millon
* Gross capital expenditures are enpected to total to P60 milien versus depreciation of P120
millon, so its net capital expenditures should total P240 million.
• The tan rate is 0N.
• There will be no changes in cash or marketable securitien, nor willthere be any changes in notes
payable or accruals
what increase in net working capital in milions) would enable the firm ta meet its target increase in
O P 72
O P130
O P156
O P108
O P 90
Consider an investment project, which behaves according to the cash flow (in local currency) below, as well as the respective inflations for the period.
In view of the above and knowing that the capital cost of the project is 15% per year, it is requested:
a) The values of NPV and IRR
b) A graphical sketch of NPVs versus interest rates
c) Decision on the feasibility of the project regarding the IRR and NPV indicators
Anos = years
Fluxo de caixa = cash flow
Taxa de inflação do período = period inflation rate
Chapter 19 Solutions
Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
Ch. 19.1 - Prob. 1CCCh. 19.1 - Prob. 2CCCh. 19.2 - Prob. 1CCCh. 19.2 - Prob. 2CCCh. 19.3 - What is a pro forma income statement?Ch. 19.3 - Prob. 2CCCh. 19.4 - Prob. 1CCCh. 19.4 - Prob. 2CCCh. 19.5 - Prob. 1CCCh. 19.5 - Prob. 2CC
Ch. 19.6 - Prob. 1CCCh. 19.6 - Prob. 2CCCh. 19 - Prob. 1PCh. 19 - Prob. 2PCh. 19 - Prob. 3PCh. 19 - Prob. 4PCh. 19 - Under the assumptions that Idekos market share...Ch. 19 - Prob. 6PCh. 19 - Prob. 7PCh. 19 - Prob. 8PCh. 19 - Prob. 11PCh. 19 - Calculate Idekos unlevered cost of capital when...Ch. 19 - Using the information produced in the income...Ch. 19 - How does the assumption on future improvements in...Ch. 19 - Approximately what expected future long-run growth...Ch. 19 - Prob. 16P
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