Cost of capital hurdle rate

Assignment Help Financial Management

Reference no: EM131938627

This question concerns calculating NPV & the largest shipping container logistics company in the world A.P. M?ller-Maersk Group, headquartered in Copenhagen, Denmark. Management is thinking of spending DKr400m now on a new leased ‘Capesize’ ship that would increase its international container delivery revenues by an estimated DKr180m annually over the vessels four-year lease term.

[Hint: Begin by graphing the relationship between NPV & discount rate for this shipping project over the lease & assume for simplicity that the relationship is linear; so find all 4 annual cash flow points on the line's graph, representing each of the 4 years of revenue! you may also considering using the RATE function in Excel].

Would you accept this project if the cost of capital hurdle rate for A.P. M?ller-Maersk Group was set at 16%?

What is the maximum discount rate at which the project would still be accepted (to 2 decimal places)?

Explain your reasoning throughout.

Reference no: EM131938627

Questions Cloud

Standard deviation of the firm returns : Returns for the Dayton Company over the last 3 years are shown below. What's the standard deviation of the firm's returns?

Equivalent in british pounds : what should we do to maximize return? Assume we have the ability to borrow $1 million, or its equivalent in British pounds.

Holding period return using leverage versus paying for BST : How much lower is his holding period return (HPR) using leverage, versus paying for BST in cash?

Calculate npv-profitability index-internal rate of return : Capital budgeting decision on new branch. Calculate the NPV, Profitability index, and Internal rate of return (IRR).

Cost of capital hurdle rate : Would you accept this project if the cost of capital hurdle rate for A.P. M?ller-Maersk Group was set at 16%?

What was the price per share : what was the price per share when you made the purchase 7 years ago?

Resulting in negative npv after the project is completed : What are the inputs to NPV that could cause the project to miss the forecast, resulting in a negative NPV after the project is completed?

Searching for job in finance-accounting or business : Imagine you have completed your bachelor’s degree at Strayer and you are searching for a job in finance, accounting or business.

The annual rate of depreciation : Compute the monthly payments on a 3-year lease for a $26629 car if the annual rate of depreciation is 20% and the lease's annual interest rate is 3.4%.

User Account

All Pages