) A firm is evaluating a proposal which has an initial investment of RM35,000 and has cash flows of RM10,000 in year 1, RM20,000 in year 2, and RM30,000 in year 3. Calculate the payback period of the project. (b) Calculate the Net Present Value for a project whose cost of capital is 15% and initial after-tax cost is RM5,000,000 and is expected to provide after-tax operating cash inflows of RM1,800,000 in year 1, RM1,900,000 in year 2, RM1,700,000 in year 3, and RM1,300,000 in year 4. (c) Tangshan Mining Company is considering investing in a new mining project. The firm's cost of capital is 12 % and the project is expected to have an initial after-tax cost of RM5,000,000. Furthermore, the project is expected to provide after-tax operating cash flows of RM2,500,000 in year 1, RM2,300,000 in year 2, RM2,200,000 in year 3, and (RM1,300,000) in year 4. (i) Calculate the project's Net Present Value. (ii) Calculate the project's Internal Rate of Return. (iii) Decide whether the firm should invest or not.
Cost of Debt, Cost of Preferred Stock
This article deals with the estimation of the value of capital and its components. we'll find out how to estimate the value of debt, the value of preferred shares , and therefore the cost of common shares . we will also determine the way to compute the load of every cost of the capital component then they're going to estimate the general cost of capital. The cost of capital refers to the return rate that an organization gives to its investors. If an organization doesn’t provide enough return, economic process will decrease the costs of their stock and bonds to revive the balance. A firm’s long-run and short-run financial decisions are linked to every other by the assistance of the firm’s cost of capital.
Cost of Common Stock
Common stock is a type of security/instrument issued to Equity shareholders of the Company. These are commonly known as equity shares in India. It is also called ‘Common equity
(a) A firm is evaluating a proposal which has an initial investment of RM35,000 and has cash flows of RM10,000 in year 1, RM20,000 in year 2, and RM30,000 in year 3.
Calculate the payback period of the project.
(b) Calculate the
for a project whose cost of capital is 15% and initial after-tax cost is RM5,000,000 and is expected to provide after-tax operating
(c) Tangshan Mining Company is considering investing in a new mining project. The firm's cost of capital is 12 % and the project is expected to have an initial after-tax cost of RM5,000,000. Furthermore, the project is expected to provide after-tax operating cash flows of RM2,500,000 in year 1, RM2,300,000 in year 2, RM2,200,000 in year 3, and (RM1,300,000) in year 4.
(i) Calculate the project's Net Present Value.
(ii) Calculate the project's
(iii) Decide whether the firm should invest or not.
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