Reference no: EM133157713

Question 1. Supposeinitial cash outflow of $100,000,the Faversham Fish Farm expected to generate net cash flows of $34,432, $39,530, $39,359,and $32,219 over the next 4 years. Assume the cost f capital is 12 %. calculate the paypack period, internal rate of return and net present value
YEAR CASH FLOWS
0
1. 34,432
2. 39,530
3. 39,359
4. 32,219

Question 2. Suppose we are asked to decide whether or not a new consumer product should be launched. Based on projected sales and costs, we expect that the cash flows over the fiveyear life of the project will be $2,000 in the first two years, $4,000 in the next two, and $5,000 in the last year. It will cost about $10,000 to begin production. We use a 10 percent discount rate to evaluate new products. What should we do here? Given the cash flows and discount rate, calculate the total value of the product by discounting the cash flows ?

Question 3. What is the payback period for this investment? If The initial cost is $500. After the first two years, the cash flows total $300( 100@1, 200@2). After the third year, the total cash flow is $800?

Question 4. Present value of cash out flows $ 180, 000, Present value of cash inflows $ 221, 513 determine PI?

Question 5. A project has a total up-front cost of $435.44. The cash flows are $100 in the first year, $200 in the second year, and $300 in the third year. What's the IRR? If we require an 18 percent return, should we take this investment?

Question 6. Assume that in today's market, rRF ! 5.6%, the market risk premium is RPM ! 5.0%, and Allied's beta is 1.48. Using the CAPM approach, Allied's cost of equity is estimated to be ______? 13

Question 7. Allied's stock sells for $23.06, its next expected dividend is $1.25, and analysts expect its growth rate to be 8.3%, find the required rate of return? 13.7. Assuming that Allied has a "flotation cost of 10%, its cost of new common equity, re,is ______?. Allied raises fund consist of 45 cents of debt with an after-tax cost of 6%, 2 cents of preferred stock with a cost of 10.3%, and 53 cents of common equity from additions to retained earnings with acost of 13.5%. find WACC?

Question 8. On May 30, 2008, Alabama Power Co. had two issues of ordinary preferred stock with a $25 par value that traded on the NYSE. One issue paid $1.30 annually per share and sold for $21.05 per share. The other paid $1.46 per share annually and sold for $24.35 per share. What is Alabama Power's cost of preferred stock? Using the first issue, calculate that the cost of preferred stock?

Question 9. Abay bond has a 10 percent coupon rate and a $1,000 face value. Interest is paid semiannually, and the bond has 20 years to maturity. If investors require a 12 percent yield, what is the bond's value?

Question 10. The next dividend for the TORPA will be $4 per share. Investors require
a 16 percent return on companies such as Gordon. Gordon's dividend increases by 6 percent every year. Based on the dividend growth model, what is the value of Gordon's stock today? What is the value in four years?

Question 11. Bangada co. has just paid a cashdividend of $2 per share. Investors require a 16 percent return from investmentssuch as this. If the dividend is expected to grow at a steady 8 percent per year, whatis the current value of the stock? What will the stock be worth in five years?

Question 12. The Timberlake Co. just paid a dividend of $1.95 per share on its stock. The dividends are expected to grow at a constant rate of 6 percent per year indefinitely. If investors require an 11 percent return, what is the current price? What will the price be in three years? In 15 years?

Question 13. The next dividend payment by Hot Wings, Inc., will be $2.10 per share. The dividends are anticipated to maintain a 5 percent growth rate forever. If the stock currently sells for $48 per share, what is the required return? For the company in the previous problem, what is the dividend yield? What is the expected capital gains yield?

Question 14. An investment project has annual cash inflows of $4,200, $5,300, $6,100, and $7,400, and a discount rate of 14 percent. What is the discounted payback period for these cash flows if the initial cost is $7,000? What if the initial cost is $10,000? What if it is $13,000?

Question 15. An investment has an installed cost of $684,680. The cash flows over the four-year life of the investment are projected to be $263,279, $294,060, $227,604, and $174,356. If the discount rate is zero, what is the NPV? If the discount rate is infinite, what is the NPV? At what discount rate is the NPV just equal to zero?
Question 16. Suppose we observe the following dividend for some company from 2005-09 is $1.10, 1.20, 1.35, 1.4, 1.55 then find the dividend growth rate?

Question 17. A company's 6% coupon rate, semiannual payment, $1,000 par value bond thatmatures in 30 years sells at a price of $515.16. The company's federal-plus-state taxrate is 40%. What is the firm's component cost of debt for purposes of calculatingthe WACC?
Question 18. Shi Importers' balance sheet shows $300 million in debt, $50 million in preferredstock, and $250 million in total common equity. Shi faces a 40% tax rate and thefollowing data: rd 6%, rps 5.8%, and rs12%. If Shi has a target capital structure of 30% debt, 5% preferred stock, and 65% common stock, what is Shi'sWACC?

Question 19. Suppose a company will issue new 20-year debt with a par value of $1,000 and acoupon rate of 9%, paid annually. The tax rate is 40%. If the flotation cost is 2% ofthe issue proceeds, what is the after-tax cost of debt?

Question 20. You are a financial analyst for the Hittle Company. The director of capital budgeting has asked you to analyze two proposed capital investments, Projects A and B.Each project has a cost of $10,000, and the cost of capital for each project is 12%.The projects' expected net cash flows are as follows:

Project A                                                         Project B

0          ($10,000)                                             ($10,000)

1          6,500                                                   3,500

2          3,000                                                   3,500

3          3,000                                                  3,500

4          1,000                                                   3,500

 

Project A Project B
0 ($10,000) ($10,000)
1 6,500 3,500
2 3,000 3,500
3 3,000 3,500
4 1,000 3,500

a. Calculate each project's payback period, net present value (NPV), internal rateof return (IRR), and modified internal rate of return (MIRR).b. Which project or projects should be accepted if they are independent?c. Which project should be accepted if they are mutually exclusive?