Risk- free rate on the treasury securities

Assignment Help Finance Basics
Reference no: EM133072368

The total market value of Biz Tech shares is $60 million, and the total market value of its debt is $40 million. The treasurer estimates that the beta of the shares is currently 1.5. The expected risk premium on the market is 8%. The risk- free rate on the Treasury securities is 5%. Biz Tech's debt requires a credit spread of 1% above the risk-free rate. The company's tax rate is 30%.

Q) The company has an expansion plan that requires $10 million initial investment. The net cash flow from the project is estimated at $2 million per year for 15 years, beginning at year 3.

Should the company take the project or not?

Assume that the company maintains its current capital structure throughout the expansion. Also, note that the net cash flow is already on the after-tax basis.

Reference no: EM133072368

Questions Cloud

Find bond data from september 2020 : Find bond data from September 2020 with maturities of less than 6 months from the U.S, Mexico, Indonesia, and Brazil. Make sure that all of the bonds have rough
Outlining a court case involving an organization : Write a summary of the case itself, including the events leading up to it and the outcome (if an outcome has occurred)
Define health communication : What may this person consider to be benefits of taking action to reduce or stop behaviors that perpetuate the health condition?
Discuss scope and nature of the risk behavior : Discuss the scope and nature of the risk behavior requiring change (Pregnancy). Identify the affected population and community for the proposed program
Risk- free rate on the treasury securities : The total market value of Biz Tech shares is $60 million, and the total market value of its debt is $40 million. The treasurer estimates that the beta of the sh
What is the correct entry for Flores on November : Flores Mills sold carpet to a customer for $8,400 with credit terms 1/10, n/30. What is the correct entry for Flores on November 10
Calculate zero rates for maturities of months : Calculate (annualized) zero rates for maturities of 6 months, 12 months and 18 months.
Chances of career or life success : Discuss how the concepts in this course can be applied to real-world situations and increase your chances of career or life success.
What types of epidemiologic research : What types of epidemiologic research could help to explain the reasons for the new mortality trend? In your one- to two-page journal entry,

Reviews

Write a Review

Finance Basics Questions & Answers

  Financial reporting and analysis

Finance is about Gunns Ltd, a company in dealing with forestry products in Australia. The company has also been listed in Australian Stock Exchange. As many companies producing forestry products, even Gunns Ltd is facing various problems. Due to the ..

  A report on financial accounting

This report is specific for a core understanding for Financial Accounting and its relevant factors.

  Describe the types of financial ratios

Describe the types of financial ratios and other financial performance measures that are used during venture's successful life cycle.

  Differences between sole proprietorship and corporation

Briefly describe the major differences between a sole proprietorship and a corporation

  Prepare a cash budget statement

Calculate the expected value of the apartment in 20 years' time. What is the mortgage loan repayment at the beginning of each month

  What are the implied interest rates

What are the implied interest rates in Europe and the U.S.?

  State pricing theory and no-arbitrage pricing theory

State pricing theory and no-arbitrage pricing theory

  Small business administration

Identify the likely stage for each venture and describe the type of financing each venture is likely to be seeking and identify potential sources for that financing.

  Effect of financial leverage

The Effect of Financial Leverage and working capital management

  Evaluate the basis for the payment to the lender

Evaluate the basis for the payment to the lender and basis for the payment to the company-counterparty.

  Importance of opps, ipps, mpfs and dmepos

Research and discuss the differences and importance of : OPPS, IPPS, MPFS and DMEPOS.

  Time value of money

Time Value of Money project

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