Should you undertake the investment opportunity

Assignment Help Financial Management
Reference no: EM131837416

You are considering investing in a start up company. The founder asked you for $260,000 today and you expect to get $980,000 in 11 years. Given the riskiness of the investment opportunity, your cost of capital is 20%. What is the NPV of the investment opportunity? Should you undertake the investment opportunity? Calculate the IRR and use it to determine the maximum deviation allowable in the cost of capital estimate to leave the decision unchanged.

Reference no: EM131837416

Questions Cloud

Historical equity risk premium : Assume a stock had an historical equity risk premium of 5.49 percent. What is the 95.4 percent range for the equity risk premium?
What is IRR of this investment opportunity : You are considering an investment in a clothes distributer. What is the IRR of this investment opportunity?
Risks of international trade on google financial statements : What are the major impacts and specific risks of international trade on google financial statements.
How much should you be willing to pay for this bond : Your required return is 8.16% per year. How much should you be willing to pay for this bond?
Should you undertake the investment opportunity : What is the NPV of the investment opportunity? Should you undertake the investment opportunity?
What was charge for depreciation and amortization : It had $2.0 million of interest expense, and its corporate tax rate was 35%. What was its charge for depreciation and amortization?
Cost of refinancing their house : If the cost of refinancing their house is ?$6,070 how long would Doug and Lynn have to remain in their home in order to recover the? cost,
Calculating loan payments : What will your monthly payments be? What is the effective annual rate on this loan?
Price the project using the rom approach : Price the project using the ROM approach (use cost per pupil). Adjust for size and location. Include designer fee - assume median quality.

Reviews

Write a Review

Financial Management Questions & Answers

  What was difference between the bid and ask price per share

What was the difference between the bid and ask price per share?

  Contest sponsors have to deposit in escrow account

how much do the contest sponsors have to deposit in the escrow account?

  Economic state probability return

Compute the expected return given these three economic states, their likelihoods, and the potential returns: (2 points) Economic State Probability Return

  Sort of relationship is portrayed by asset pricing models

What sort of relationship is portrayed by asset pricing models (between which variables)? To what extent are the assumptions behind the asset pricing models realistic? Do the assumptions pose a problem in applying the models in real life? Give an exa..

  Bonds yield to maturity

Suppose a five- year bond with a 7% coupon rate and semiannual compounding is trading for a price of $951.58. Expressed as an APR with semiannual compounding, this bonds yield to maturity (YTM) is closest to.

  Cost of common equity-the future earnings and dividends

Cost of Common Equity The future earnings, dividends, and common stock price of Carpetto Technologies Inc. are expected to grow 4% per year. Carpetto's common stock currently sells for $30.00 per share; its last dividend was $2.50; and it will pay a ..

  What is value of firm according to mm with corporate taxes

The Hatfields Corporation is a zero growth firm with an expected EBIT of $250,000 and corporate tax rate of 40 percent. Hatfields uses $1,000,000 of debt financing, and the cost of equity to an unlevered firm in the same risk class is 15%. What is th..

  Affect the relative competitive positions of caterpillar

Suppose that a decade ago, the Japanese yen stood at 120 Yen/$; Today, 10 years later, the Japanese yen is trading at 100 Yen/$. Consider the case of the heavy earth-moving equipment industry, What has happened to the Japanese Yen and how does it aff..

  Upper limit for debt payments including mortgage

What percentage will a bank use as the upper limit for debt payments (as a percentage gross income) including mortgage?

  The standard deviation of the portfolio

Assume the standard deviation of security A is 0.3 and the standard deviation of security B is 0.33 The correlation coefficient between A and B is 0.4 What is the standard deviation of a portfolio composed of 55 % security A and 45 %security? B? The ..

  How much money has accumulated so far

If the fund earns 6% annual interest, how much money has accumulated so far?

  Talk on the factors influencing this price result

Pabon has a P/E of 10 and a dividend of $2 per share. It has 1 m shares outstanding and $80 m of book value of equity. Pabon expects to make EAT of $5 million in the coming year. Derive its price. Talk on the factors influencing this price result.

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