User Account

All Pages

What is the npv of the project using the wacc methodology

Assignment Help Finance Basics
Reference no: EM132501078

What is the NPV of the project using the WACC methodology, given the following information?

i = rdebt = 10% OCF0 = -$100,000

Ku = rassets = 15% OCF1-4 = $39,800 = 25,000 × ($5 - $3) × (1 - 0.34) + $20,000 × 0.34

Kl = requity = 24.9% OCF5 = $43,100 = $39,800 + $5,000 × (1 - 0.34)

K = rWACC = 11.20% Tax rate = 34% Debt-to-equity ratio = 3 Risk-free rate = 2%

The 5-year project requires equipment that costs $100,000. If undertaken, the shareholders will contribute $25,000 cash and borrow $75,000 with an interest-only loan with a maturity of 5 years and annual interest payments. The equipment will be depreciated straight-line to zero over the 5-year life of the project. There will be a pre-tax salvage value of $5,000. There are no other start-up costs at year 0. During years 1 through 5, the firm will sell 25,000 units of product at $5; variable costs are $3; there are no fixed costs.

Group of answer choices

A. $48,300.47

B. $49,613.03

C. $102,727.55

D. $58,028.68

Reference no: EM132501078

Questions Cloud

Demonstrate the profit margin for trousers using ABC : Demonstrate the profit margin for trousers using ABC. Fleet Street Inc., a manufacturer of high-fashion clothing for women, is located in South London
Find how Garner arrives at the order-filling cost per unit : Demonstrate how Garner arrives at the $66.76 order-filling cost per unit.Garner Industries manufactures precision tools. The firm uses an activity-based costing
Describe the Activity-based costing system : Describe the Activity-based costing system and provide the example that you are recommending. Include a justification for the cost driver selected.
Discuss an example of a restricted resource : Discuss An example of a restricted resource, whether in the production of a product or article, or service. An alternative for this to generate profits
What is the npv of the project using the wacc methodology : What is the NPV of the project using the WACC methodology, given the following information?
What is the levered after-tax incremental cash flow for year : Assume that the firm will partially finance the project with a $3,000,000 interest-only 30-year loan at 10.0 percent APR with annual payments.
Which modules should be refactored first : Which modules should be refactored first? Discuss how a move to a microservice approach for these modules would resolve issues around workload peaks?
Develop a web-based student registration system : Imagine you are a software engineer working on a fixed budget and you are tasked to develop a Web-based student registration system. This Web-based system.
MBA717 - Strategic Development Assignment : MBA717 - Strategic Development Assignment - Essay - Brief. TASK - Develop a Strategic Business Plan for a New Venture using the APA Referencing System

Reviews

Write a Review

Finance Basics Questions & Answers

  Time value of money definitions

As a financial manager you will often have to compare cash payments which take place at different dates. To make optimal decisions, you must understand the relationship between a dollar today [present value] and a dollar in the future [future valu..

  Which might be potential challenges for the firm

Do you think Shafer’s plan to grow his business slowly is a good one? Why or why not? What economic and social factors do you think have aided Tumbleweed’s success so far? Which might be potential challenges for the firm that Shafer should consider?

  The cost of debt capital is 10%.

VWX Corporation has an EBIT of $166,666.67, a corporate tax rate of 40%, debt of $500,000, and unlevered cost of capital of 20%. The cost of debt capital is 10%.

  Given the free cash flow model the adjusted present value

given the free cash flow model the adjusted present value model and the residual income model please answer the

  Characteristic to be a successful entrepreneur

From your own perspective, what do you think is/are the most important characteristic(s) to be a successful entrepreneur.

  Define and explain the credit multiplier

Define and explain the credit multiplier

  What is the initial requirement

In the previous problem, suppose you sell the stock at a price of $42. what is your return? what would your return have been had you purchased the stock without margin? what if the stock price is $34 when you sell the stock?

  Which professional designation would be more appropriate

What type of financial professional should you consult with for achieving personal financial goals? Would a Certified Public Accountant (CPA) be an appropriate.

  Calculate the payoffs for the strategies you chose in q1a

Calculate the payoffs for the strategies you chose in Q1a combined with the long position in the stock. Comment on your results.

  What are the main strengths and weaknesses of asseth

Explain how the asset approach to the exchange rate derives the fair value of an exchange rate. What are the main strengths and weaknesses of this approach?

  What are the 5 factors of production

what are the 5 factors of production and why are they important?

  What was last year dividend per share

Fauver Enterprises declared a 3-for-1 stock split last year, and this year its dividend is $1.50 per share. This total dividend payout represents a 6% increase.

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd