Calculate the npv of the project

Assignment Help Finance Basics
Reference no: EM133076147

CBC Inc. invests in a project that requires a machine of $39,000 and will generate annual taxable cash flow of $7,200 for 10 years. The machine has a CCA rate of 25% and salvage value of $900 at year 10. The asset class remains open with positive UCC. The unlevered cost of equity is 9%, the cost of debt is 5% and the tax rate is 30%.

-Assume the project will be financed at its target debt-to-equity ratio of 0.4, calculate the NPV of this project using the WACC method.

-Assume CBC borrows $8,000 to finance the project and repay the loan when the project ends, calculate the NPV of the project using the APV method.

-With the same assumptions as part B, calculate the NPV of the project using the FTE method.

Reference no: EM133076147

Questions Cloud

What amount of equity income would Steven have recognized : What amount of equity income would Steven have recognized in 2011 from its ownership interest in Nicole
Calculate the stock price-renewals ltd : Renewals Ltd. is a firm with existing assets that generate an earnings per share of $5.00. If the firm does not invest except to maintain existing assets, the e
What was her position initially : Question - Ashley got into a long position of 5 September 2022 Silver contracts at 20.500. What was her position initially
Why do banks invest in type of security : A proportion of these securities may be Government Securities. Explain what are government securities and why do banks invest in this type of security?
Calculate the npv of the project : CBC Inc. invests in a project that requires a machine of $39,000 and will generate annual taxable cash flow of $7,200 for 10 years
Calculate the present value of future cash flows : Calculate the present value of these future cash flows. Assume a discount rate of 6%. Round your final answer to the nearest dollar.
Write double entry record the transactions in t-accounts : She contributed to the business with £10,000 in the Bank, £4,800 cash, 45,000 flat and 12,000 Car. Write double entry record the transactions in T-accounts
What are government securities : What are Government Securities? Why do banks invest in Government Securities?
Retirement income on a personal level : Retirement income On a personal level, assess the level of income you think you would need - at a minimum - when you retire.

Reviews

Write a Review

Finance Basics Questions & Answers

  Balance of trade between the us

How does the fed increasing short term interest rates affect the balance of trade between the US and every one else?

  What is ezcube unlevered beta

The Bonds have a beta of 0.16 and the equity had a beta of 1.24. What is EZCube's unlevered beta?

  Discuss and compare hedging transaction exposure

Discuss and compare hedging transaction exposure using the forward contract vs. money market instruments.

  What is the value of the stock

The dividend is expected to grow at 24.64% for three years and then grow at 3.58% forever. What is the value of the stock?

  Research on loan terms and assumptions

Financing analysis: Given a property information. Research on loan terms and assumptions, calculations on equity vs. debt, use of special financing programs (like tax credits), calculation of effective borrowing costs and/or lender yields.

  Expect the price of a bond

Why do we expect the price of a bond to equal its Par Value at maturity?

  List some of the important characteristics of bank foreign

List some of the important characteristics of bank foreign exchange services that MNCs should consider.

  What is the capital gain yield on the bonds

The price of the bonds is $1,067.19 to yield 4.77%. What is the capital gain yield on the bonds?

  Tri state pickle company preferred stock pays a perpetual

tri state pickle company preferred stock pays a perpetual annual dividend of 2 12 of its 100 par value. if investors

  Simple interest versus compound interest

First City Bank pays 7.5 percent simple interest on its savings account balances, whereas Second City Bank pays 7.5 percent interest compounded annually.

  A banks core business is credit lending the following risk

1 a banks core business is credit lending. the following risk and return numbers are given for the last

  What is the monthly mortgage payment for the borrower

Consider a borrower that is approved for a standard 10-year, fully amortizing house mortgage with an original balance of $500,000 and a note rate

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd