Calculate the traditional net present value, Microeconomics

Assignment Help:

Fiera Corporation is evaluating a new project that costs $45,000.  The project will be financed using 40% debt and 60% equity, thus maintaining the firm's current debt-to-equity ratio.  The firm's stockholders have a required rate of return of 18.36%, and its bondholders expect a 10.68% rate of return.  The project is expected to generate annual cash flows of $13,000 before taxes for the next two decades.  Fiera Corporation is in the 36% tax bracket.

Instructions - complete as an excel worksheet and show all calculations for this assignment.

Questions:

1.  Determine the firm's weighted average cost of capital (WACC).

2.  Calculate the traditional net present value (NPV) of the project using the WACC.

a.  Should the project be undertaken?

3.  Using Modigliani and Miller's Proposition II, determine the required return on unlevered equity.

4.  Use the adjust present value (APV) method to determine whether or not the project should be undertaken.

5.  Use the flow-to-equity (FTE) method to calculate whether or not the project should be undertaken.

 

 


Related Discussions:- Calculate the traditional net present value

Briefly explain the main macroeconomic objectives, Briefly explain the main...

Briefly explain the main macroeconomic objectives of governments. Definition of macroeconomic issues Growth a)      Enhance in national income per unit of time, a

Economic rent, Economic Rent - Economic rent is difference between what...

Economic Rent - Economic rent is difference between what firms are willing to pay for the input less the minimum amount required to obtain it. * An Example - There are tw

Determine the is this agent maximizing is utility, 1. Suppose the wage rate...

1. Suppose the wage rate is w = 1. An agent is working 6 hours per day and consumes 5 units of goods per day. Suppose that the agent claims to be indifferent between his current

Causes of inflation, Causes of inflation: Excessive growth in wages ...

Causes of inflation: Excessive growth in wages relative to productivity can cause inflationary pressures. This causes aggregate demand to increase relative to aggregate supp

Time value of money, Time Value of Money The time value of money is the...

Time Value of Money The time value of money is the price or value placed on time. It is commonly thought of as the opportunity cost related with a particular investment. Money

Long-run behavior, The Long-Run Behavior of Natural Resource Prices Ob...

The Long-Run Behavior of Natural Resource Prices Observations – Exhaustion of copper has increased by a hundred fold from 1880 through 1998 signifying a large increase in

Elasticity, What are the uses of elasticity’s to the public sector and priv...

What are the uses of elasticity’s to the public sector and private sector?

Write Your Message!

Captcha
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