Reference no: EM133071149
Questions -
Q1. Murdoch Pty Ltd is considering three mutually exclusive projects. The initial cash outflow and after-tax cash inflows associated with each project are show in the following table:
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Cash Flows
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Project X ($)
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Project Y ($)
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Project Z ($)
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Initial Cash Outflow
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50,000
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100,000
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115,000
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Cash Inflows Years 1-5
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27,000
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41,000
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43,000
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A) Calculate the payback period for each period
B) Calculate the NPV of each project assuming, that the company has a cost of capital equal to 13%
C) Calculate IRR for each project.
D) Summarise the preferences dictated by each measure, and indicate which project you would recommend. Explain why.
Q2. Whale Wash Limited issued eleven-year bonds one year ago at a coupon rate of 7.5%. The bonds have a face value of $150,000 and make semi-annual payments. It the YTM on the bonds is 8.6% p.al, what is the current bond price?
Q3. Why does the value of a share depend on a dividend?
Q4. Perth Limited has just paid an annual dividend per share of $0.75. The firm expects that dividends will grow at a rate of 8% pa for the next three years, before settling down to a growth rate of 5% pa forever. The firm's required rate of return is 12%. Estimate the value of Perth Ltd's shares.
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What is the value of the investment
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