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- A firm evaluates all its projects by applying the IRR rule. the current proposed project has a cash flow of negative 37,048 dollars, 16,850 15,700 and 19,300 for years zero to three, respectfully. The required return is 18%. what is the project IRR? should the products be accepted or rejected?You estimate that a planned project for your company has a 0.3 chance of tripling the investment in a year and a 0.7 chance of halving the investment in a year. What is the standard deviation of the return on this project? A.1.5625 B.1.3126 C.1.2247 D.1.1457A company wants to invest $619,932 today. The expected returns in years 1, 2, and 3 are $244,539, $175,421, and $341,884, respectively. If the rate of return on investment must be at least 15%, and the probability of commercial and technical success are 0.89 and 0.86, respectively. What is the maximum expenditure justified that the company may spend?
- If company’s debt-to-equity ratio is 0.25, what is the weighted average cost of capital for the company if the required rate of return is 12. 1% and the cost of debt is 6.5%? Assume no tax rate A 7.90% B 7.62% C 10.98% D 10.70% E 9.30% Company is considering investing in a project. After consulting with their analysts, they find that the payback period for the project is 2 years and 6 months. If cash inflows are $4, 000. then the initial investment is. Answer rounded to the nearest whole dollarThe managers of a company are considering an investment with the following estimated cash flows. MARR is 15% per year. The company is inclined to make the investment; however, the managers are nervous because all of the cash flows and the useful life are approximate values. The capital investment is known to be within ±5%. Annual expenses are known to be within ±10%. The annual revenue, market value, and useful life estimates are known to be within ±20%. Solve, a. Analyze the sensitivity of PW to changes in each estimate individually.Based on your results,make a recommendation regarding whether or not they should proceed with this project. Graph your results for presentation to management.b.The company can perform market research and/or collect more data to improve the accuracy of these estimates. Rank these variables by ordering them in accordance with the need for more accurate estimates (from highest need to lowest need).A company has a required return of 12%, a profit margin of 4%, a D/E ratio of 0.5 and total asset turnover of 2. Annual dividends last year were $2.00. A) The company has a dividend payout ratio of 20%; calculate the price and forward P/E ratio. B) If the company would have changed its dividend payout ratio to 60%, what would happen to the price and forward P/E ratio? C) What variables are critical to determine if they should increase or decrease their dividend payout ratio? (Hint be specific what variables do you need to know.)
- If B.E.P=$200 in Project C rapidly becomes $500; but the Revenues is fixed at $600 then expected Profit in this Project is being close to a risk.A company with a cost of capital of 10 per cent has non-postponable investment opportunities with the estimated cash flows shown below. None of the projects can be undertaken more than once. Year Project A Project B Project C (£’000) (£’000) (£’000) 0 (2400) (2250) (1500) 1 600 900 450 2 900 900 450 3 1200 900 450 4 1200 900 450 5 900 900 450 6 600 450 7 (300) 450 a) Decide which projects should be accepted in the following circumstances: i) the company is not in a capital rationing situation; ii) the company is in a capital rationing position, the projects are divisible and only £4,500,000 is available for investment in year 0. the company is in a capital rationing position, the projects are not divisible and only £4,500,000 is available for investment in year 0. b) The payback period has…A firm has £ 100m cash in hand and a debt obligation of £ 100m due at the end of the year. With this amount of cash, it can take one of two projects, A or B, which cost £ 100m each. At the end of the year, project A pays £ 120m if the economy is favourable and £ 60m if the economy is unfavourable. In contrast, project B pays £ 101m regardless of the state of the economy. Assume that the firm is not able to raise any additional funds. Further, assume that investors are risk-neutral, there are no taxes and no direct costs of bankruptcy, the risk-free rate of interest is nil, and the probability of each state of the economy is equal. i. What is the NPV of each project? ii. Which project will equity holders want the firm's manager to take? Explain. iii. Calculate the magnitude of the agency cost of risk shifting. iv . Assume that the firm's manager works on behalf of the equity holders. Should debtholders engage in debt forgiveness and accept a lower debt obligation equal to £ 82m?…
- T&G Ltd has only £600,000 to invest and four possible projects, as follows: Project Initial investment £ NPV £ A (275,000) 55,225 B (160,000) 35,769 C (55,000) 15,385 D (320,000) 69,003 Projects cannot be scaled up but they can be scaled down if necessary. Rank the projects using the profitability index Allocate the capital available in the best way possibleA firm wants to invest in a project whose financial information is below. The tax rate is 30%, and the MARR (Minimum Attractive Rate of Return) is 16%. Answer the following questions based on the information given in the table. Initial investment cost (TL) 155,000 Operating expenses (TL/year) 42,000 General maintenance cost (TL) (end of 3rd year) 26,500 Income (TL/year) 65,000 Salvage value (TL) 41,000 Economic life (year) 5 Taking into account the net cash flows of the project after tax; a) Calculate the annual depreciation amount required by the company for the project using the straight-line (SL) depreciation method. b) What is the project's net cash flow amount in the initial period? c) What is the project’s net cash flow amount in the operating periods? d) What is the project's net cash flow amount in the last period? e) Calculate the Net Present Value of the project and evaluate it from an economic point of view.ABC Company that has current operating assets of one million and net income of P200,000 has an opportunity to invest in a project that requires an additional investment of P250,000 and an increase in net income by P40,000. After the investment, the company’s RoI will be • 17% • 18.2% • 19.2% • 21% • None of the above