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How does higher WACC affect NPV? How does higher WACC affect IRR? If interest rates are high, what type of project do you want to invest in? Draw NPV profile for these 2 projects and calculate the crossover rate. Describe the conflict area on the graph, and which project is better in the conflict area?
Project 1 cash flows are: -2M; 400K; 500K; 600K; 3.2 million
Project 2 cash flows are: -2 million; 2.7 million; 400K; 300K; 200K
A vendor offers payment terms of 3/20, net 60. What does this mean for the timing and costs of paying this vendors bills? Using a 360 day year, what is the cost of trade credit from this vendor?
An investment fund has the following assets in its portfolio: $40 million in fixed-income securities and $40 million in stocks at current market values. In the event of a liquidity crisis, it can sell its assets at a 96 percent discount if they are d..
Rational investors ________ fluctuations in the value of their investments.
The expected return on the market portfolio is 15%. The standard deviation of return on the market portfolio is 12%. Beta of stock A is 1.2 and the standard deviation of return on stock A is 18%. What could be the expected return of stock A?
Genoa ltd is about to start a new project that will have a Net Present Value of $100 million. The stock currently trades at $105 and there are 2,000,000 shares outstanding. In order to start the project the company needs to raise $400,000,000 in new ..
Suppose that you take out a loan for $60,000 that is to last for 10 years. The interest rate is 9% APR, and the payments are monthly. After making the payment that corresponds to 2 ½ years after the time of the loan, you decide that you would like to..
ABC Company sells 4,254 chairs a year at an average price per chair of $187. The carrying cost per unit is $15.29. The company orders 282 chairs at a time and has a fixed order cost of $30.7 per order. The chairs are sold out before they are restocke..
The law firm of Dewey, Cheatem, and Howe has monthly fixed costs of $98,000, EBIT of $223,000, and depreciation charges on its office furniture and computers of $7,000. Calculate the Cash Flow DOL for this firm.
Assume Kang Inc. is a $1 billion all-equity firm with a tax rate of .2 and a beta of .8. The riskfree rate is 2% and the equity risk premium is 6%. What is its WACC? Assume Kang Inc. is considering issuing .2 billion in debt to retire equity. This de..
Consider the purchase of a $10,000 capper, a three year asset, in year zero and its sale in year four for $2,000. Show in the table below, the pre-tax cash flow, depreciation, tax savings from depreciation, gains tax, and after tax cash flow with a t..
If National Bank of Guerneville has $4 million in reserves and Commonwealth has $5 million in reserves, how much in excess reserves does each bank have?
You would liike to increase your purchasing power next year by about 4%. If you expect prices to increase at a rate of 2% over the next year, what approximate increase would you need in your salary in order to achieve your desired increase in purchas..
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