What discount rate should peter pet foods use

Assignment Help Financial Accounting
Reference no: EM133027769

Question - Peter's Pet Foods has a WACC of 12.5 percent and is considering manufacturing pet toys. Tim's Toys specializes in pet toys and has a WACC of 10.5 percent. What discount rate should Peter's Pet Foods use to evaluate this investment?

a) 10.5 percent because that is appropriate given the risk of the project

b) 12.5 percent because that is the appropriate rate for the company

c) 11.5 percent because after investment Peter's will be a combination of the two businesses

d) A weighted average of 12.5 and 10.5 with the weights based on the proportion in each business

e) The risk-free rate.

Reference no: EM133027769

Questions Cloud

Indicate the division of net income to each partner : Rod Dall Co. reports net income of $74,000. The income ratios are Rod 67% and Ball 33%. Indicate the division of net income to each partner
PSY 5993-41 Directed Research Assignment : PSY 5993-41 Directed Research Assignment Help and Solution, Evaluating Evidence in the Psychology of Culture, Race, and Ethnicity - University of Minnesota
Compute the adjusted cost : Compute the adjusted cost base of each component of the consideration that Ms. Bond has received from the corporation
What were the actual costs incurred : Your Company's flexible budget cost formula for indirect materials is $1,000 FC + $0.45 per unit of output. What were the actual costs incurred
What discount rate should peter pet foods use : Tim's Toys specializes in pet toys and has a WACC of 10.5 percent. What discount rate should Peter's Pet Foods use to evaluate this investment
Discuss three phases of mapreduce framework : Discuss three phases of MapReduce framework to determine the number of customer claims from database and discuss an alternative solution to replaceMapReduce
Find the price of molybdenum : If the discount rate is 16%, find the price of molybdenum above which it makes sense to do the investment, i.e. find the price at which the NPV is zero
What is the probability : What is the probability that none of the production facilities will be damaged by fire in any given year
What is the NPV of this project : One-year taxable bonds that have similar risk to the project are yielding 9%. Similar-risk municipal bonds are yielding 6%. What is the NPV of this project

Reviews

Write a Review

Financial Accounting Questions & Answers

  How will business provide a need in the economy

How will your business provide a need in the economy? Explain one item that you have learned in this accounting course that you did not know before?

  Determine the company weighted average cost of capital

Big Brothers, Inc. capital structure, compute the company's weighted average cost of capital (WACC). The company's marginal tax rate is 40%.

  Which is incorrect concerning reversal of an impairment loss

Which is incorrect concerning the reversal of an impairment loss? When should a long-lived asset be tested for recoverability? Value in use of an asset is equal

  What should inventory level be when a new order is placed

If the store insists on a 2 day(s) safety stock (assume 365-days a year), what should the inventory level be when a new order is placed?

  Determine how do find the dividend amount and price

Determine How do you find the Dividend Amount and Price while determining Dividend yield? How do you find P0 and P1 in CGY?

  Why is common that firms with higher return on net operating

Why is common that firms with higher return on net operating assets (RONA) also have negative free cash flows. Also explain why such firms

  Estimate of fixed costs for fleet operating expenses

The Apollo Delivery Service has the following information about its truck fleet miles and operating costs: Year Miles Operating Costs 2011 250,000 $160,000 2012 300,000 $175,000 2013 350,000 $210,000 What is the best estimate of fixed costs for fleet..

  What is an impairment loss

What is an impairment loss - what is a cash-generating unit and determine if an impairment loss exists for the nursery division and how is value in use for a cash generating unit calculated.

  What amount should be reported as total income tax expense

The enacted tax rates are 30% for 2020 and 25% for 2021 and thereafter. What amount should be reported as total income tax expense

  What would be the value of the project for mlk

MLK, LLC., has sold shoes for over 112 years. What would be the value of the project if the company finances with the proposed debt and computes the APV?

  Find what is the recoverable amount of the asset

Prior to sale the company would incur legal costs of £500. In accordance with IAS36, what is the recoverable amount of this asset?

  What are the estimated direct costs

What are the estimated direct costs, including capital, marketing, labor, and supply costs for Hyundai Motor Company's electric vehicle (EV) 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