Project will produce after-tax operating cash inflows

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Reference no: EM132063915

1. A project will produce after-tax operating cash inflows of $3,200 a year for 5 years. The after-tax salvage value of the project is expected to be $2,500 in year 5. The project's initial cost is $10,500. What is the net present value of this project if the required rate of return is 16 percent??

-$311.02

$2,168.02

$1,168.02

$9,188.98

2. You have been given the following facts and assumptions concerning ABC Corp. at December 31, 2013. Yield to maturity on long term government bond is 5.00%. Yield to maturity on company long term government bond is 7.0%.Coupon rate on company long term bond is 7.0%.Market price of risk is 8.0% along with estimated company beta value of 1.5.Stock is selling for $40 in the market and 250 million shares are outstanding. Assuming that book value of equity is $5240 million along with book value of interest bearing debt of $1250 million. Existing tax rate stands at 35%.Given all the information estimate ABC Corp's after-tax cost of equity capital?

4.50%

17.00%

7.93%

12.20%

Reference no: EM132063915

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