UPENN: LOOSE LEAF CORP.FIN W/CONNECT
17th Edition
ISBN: 9781260361278
Author: Ross
Publisher: McGraw-Hill Publishing Co.
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Chapter 18, Problem 18QP
Summary Introduction
To determine: The NPV of the Project.
Introduction:
A flow to equity (FTE) measure of profit that will be designated to investors by another organization other than the issuing organization, similar to a LLC. An Adjusted
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Students have asked these similar questions
Blue Cod, Inc., a private firm in the holiday gift industry, is considering a new project. The company currently has a target debt-equity ratio of .35, but the industry target debt-equity ratio is .30.
The industry average beta is 1.50. The market risk premium is 8 percent, and the risk-free rate is 6 percent. Assume all companies in this industry can issue debt at the risk-free rate. The corporate
tax rate is 40 percent. The project requires an initial outlay of $690,000 and is expected to result in an after-tax EBIT of $110,000 at the end of the first year. The project will be financed at the
company's target debt-equity ratio. Annual cash flows from the project will grow at a constant rate of 7 percent until the end of the fifth year and remain constant forever thereafter. What is the
NPV of this project? (Keep at least 3 decimal places in intermediate steps. Choose an answer that is closest to yours)
$263,770.1
$211,264.8
$291,028.5
$237,186.1
Blue Angel, Inc., a private firm in the holiday gift industry, is considering a new project.
The company currently has a target debt-equity ratio of .45, but the industry target debt-
equity ratio is .50. The industry average beta is 1.10. The market risk premium is 6.9
percent and the risk-free rate is 4.5 percent. Assume all companies in this industry can
issue debt at the risk-free rate. The corporate tax rate is 23 percent. The project requires
an initial outlay of $825,000 and is expected to result in a $101,000 cash inflow at the
end of the first year. The project will be financed at the company's target debt-equity
ratio. Annual cash flows from the project will grow at a constant rate of 5 percent until
the end of the fifth year and remain constant forever thereafter.
Calculate the NPV of the project. (Do not round intermediate calculations and round
your answer to 2 decimal places, e.g., 32.16.)
NPV
Hw.16.
Blue Angel, Inc., a private firm in the holiday gift industry, is considering a new project. The company currently has a target debt–equity ratio of .45, but the industry target debt–equity ratio is .40. The industry average beta is 1.30. The market risk premium is 8 percent, and the risk-free rate is 6 percent. Assume all companies in this industry can issue debt at the risk-free rate. The corporate tax rate is 35 percent. The project requires an initial outlay of $676,000 and is expected to result in a $96,000 cash inflow at the end of the first year. The project will be financed at the company’s target debt–equity ratio. Annual cash flows from the project will grow at a constant rate of 6 percent until the end of the fifth year and remain constant forever thereafter.
Calculate the NPV of the project.
Chapter 18 Solutions
UPENN: LOOSE LEAF CORP.FIN W/CONNECT
Ch. 18 - APV How is the APV of a project calculated?Ch. 18 - WACC and APV What is the main difference between...Ch. 18 - FTE What is the main difference between the FTE...Ch. 18 - Prob. 4CQCh. 18 - Prob. 5CQCh. 18 - NPV and APV Zoso is a rental car company that is...Ch. 18 - APV Gemini, Inc., an all-equity firm, is...Ch. 18 - Prob. 3QPCh. 18 - Prob. 4QPCh. 18 - Prob. 5QP
Ch. 18 - Prob. 6QPCh. 18 - Prob. 7QPCh. 18 - WACC National Electric Company (NEC) is...Ch. 18 - WACC Bolero, Inc., has compiled the following...Ch. 18 - Prob. 10QPCh. 18 - Prob. 11QPCh. 18 - APV MVP, Inc., has produced rodeo supplies for...Ch. 18 - Prob. 13QPCh. 18 - Prob. 14QPCh. 18 - Prob. 15QPCh. 18 - Prob. 16QPCh. 18 - Prob. 17QPCh. 18 - Prob. 18QPCh. 18 - Prob. 1MC
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