Calculate the project-specific benchmarks for each project

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Reference no: EM131911083

1. Midland Oil has $1,000 par value bonds outstanding at 18 percent interest. The bonds will mature in 25 years. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. Compute the current price of the bonds if the present yield to maturity is: (Do not round intermediate calculations. Round your final answers to 2 decimal places. Assume interest payments are annual.)

Bond Price

a. 17 percent

b. 15 percent

c. 16 percent

2. An all-equity firm is considering the projects shown below. The T-bill rate is 6 percent and the market risk premium is 9 percent. Project Expected Return Beta A 11 % 0.5 B 16 % 1.2 C 18 % 1.4 D 22 % 1.6 Calculate the project-specific benchmarks for each project. (Round your answers to 2 decimal places.) Project A % Project B % Project C % Project D % If the firm uses its current WACC of 17 percent to evaluate these projects, which project, will be incorrectly rejected? Project A Project B Project C Project D

Reference no: EM131911083

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