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1) Calculate the NPV and the IRR for the following project and state whether or not you would accept the new project:
Required rate of return = 9%
Initial outlow = $75,000
Inflows:
Years 1-3: $25,000 per year
Year 4: ($10,000) Note is this a cash OUTFLOW
Year 5: $30,000
Year 6: $10,000
2) If there are multiple IRRs, how will you resolve the conflict?
3) Your firm is in the 30% tax bracket with a before-tax required rate of return on its equity of 13% and on its debt of 10%. If the firm uses 60% equity and 40% debt financing, calculate its after-tax WACC.
4) What determines whether to use the dividend growth model approach or the CAPM approach to calculate the cost of equity?
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