Your company uses the project market line (PML). You are considering five projects. The projects and...
Your company uses the project market line (PML). You are considering five projects. The projects and their respective betas and costs of capital are: Project A: 1.30 and 17.4%; Project B: 1.75 and 21.0%; Project C: 0.95 and 14.6%; Project D: 1.5 and 19.0%; and, Project E: 0.60 and 11.8%. If the firm's overall average cost of capital is 18.4%, which projects are the best candidates for selection?
Group of answer choices
Projects C and E because they have the lowest betas.
Take no projects.
Projects A, C, and E because they have the costs of capital below the firm's average cost of capital.
Cannot determine which projects are the best to select without more information.
Homework Answers
rate positively .. let me know if you need any clarification..
| Project | Cost of capital | |||||||||
| A | 17.40% | |||||||||
| B | 21% | |||||||||
| C | 14.60% | |||||||||
| D | 19% | |||||||||
| E | 11.80% | |||||||||
| We can see above that project A, C and E has cost of capital lower than 18.4%. This means these project will generate | ||||||||||
| positive NPV . | ||||||||||
| therefore correct answer is option = | ||||||||||
| Projects A, C, and E because they have the costs of capital below the firm's average cost of capital. | ||||||||||
Add Answer to:
Your company uses the project market line (PML). You are
considering five projects. The projects and...
Sandwich Company is considering five independent projects, each of the project will require a $10 million...
Sandwich Company is considering five independent projects, each of the project will require a $10 million investment. The estimated IRR and cost of capital for these projects are presented as follows: Project A Cost of capital = 12% RR = 14% Project B Cost of capital = 14% IRR = 12% Project C Cost of capital = 8% IRR = 10% Project D Cost of capital = 9% IRR = 10% Project E Cost of capital = 16,5% IRR =...
The Suboptimal Glass Company uses a process of capital rationing in its decision making. The firm's...
The Suboptimal Glass Company uses a process of capital rationing in its decision making. The firm's cost of capital is 14 percent. It will invest only $73,600 this year. It has determined the IRR for each of the following projects: Project Project Size Internal Rate of Return A $10,900 14.0% B 25,900 15.0 C 25,900 16.0 D 10,900 17.0 E 10,900 11.0 F 20,900 19.0 G 15,900 21.0 a. Pick out the projects...
Suppose you are the financial manager of a firm considering the following five projects. Project A...
Suppose you are the financial manager of a firm considering the following five projects. Project A Project B Project C Project D Project E Initial Investment -$10,000 -$15,000 -$14,000 -$6,000 -$1,500 Year 1 $5,000 $5,000 $6,000 $4,000 $1,000 Year 2 $4,000 $5,000 $4,000 $2,000 $250 Year 3 $2,000 $5,000 $3,500 $2,000 $100 Year 4 $1,000 $5,000 $2,500 $2,000 $100 Year 5 $5,000 $2,000 $100 Year 6 $2,000 $100 Calculate the Payback Period for each project. Calculate the NPV for each...
The Suboptimal Glass Company uses a process of capital rationing in its decision making. The firm's...
The Suboptimal Glass Company uses a process of capital rationing in its decision making. The firm's cost of capital is 14 percent. It will Invest only $73,600 this year. It has determined the IRR for each of the following projects: Project Internal Rate of Return 14.ex 8 15. 16.0 Project Size $19,900 25,900 25,900 10,900 19,900 20,900 15,900 17.0 19.0 21.0 a. Pick out the projects that the firm should accept (You may select more than one answer. Click the...
Risk-adjusted discount rates—Basic Country Wallpapers is considering investing in one of three mutually exclusive projects, E,...
Risk-adjusted discount rates—Basic Country Wallpapers is considering investing in one of three mutually exclusive projects, E, F, and G. The firm's cost of capital, r, is 14.6%, and the risk-free rate, RF, is 10.4%. The firm has gathered the following basic cash flow and risk index data for each project 2 a. Find the net present value (NPV) of each project using the firm's cost of capital. Which project is preferred in this situation? b. The firm uses the following...
You are considering the following two mutually exclusive projects. The required rate of return is 10.75...
You are considering the following two mutually exclusive projects. The required rate of return is 10.75 percent for project A and 12 percent for project B. Which project should you accept and why? Project A -36,000 21,600 18,200 22,100 Project B -69,900 52,600 46,100 Year 1 2 3 0 Project B; because it has the largest total cash inflow Project A; because its NPV is about $796 more than the NPV of Project B Project B; because it returns all...
You are considering the following two projects and can only take one. Your cost of capital is 11.4 %. The cash flows for the two projects are as follows ($ million): Project Year 0 Year 1 Y...
You are considering the following two projects and can only take one. Your cost of capital is 11.4 %. The cash flows for the two projects are as follows ($ million): Project Year 0 Year 1 Year 2 Year 3 Year 4 A −$102 $27 $31 $39 $49 B −$102 $49 $39 $31 $20 a. What is the IRR of each project? b. What is the NPV of each project at your cost of capital? c. At what cost of...
NPV Your division is considering two projects with the following cash flows millions): Project A 19...
NPV Your division is considering two projects with the following cash flows millions): Project A 19 Project B 17 a. what are the wojects' Nns assuming the wACC is 5%? Round your answer to two decimal places Do not round your intermediate oalculatio s Enter your ans w $8 $11 $15 $8 s6 maons. .。 example, an answer of $10,50,000 should be entered as 10.5s. Negative value should be indicated by a minus sign Project A Project 8s what are...
Use the following for Questions 1 - 5: You are considering two mutually exclusive projects, A...
Use the following for Questions 1 - 5: You are considering two mutually exclusive projects, A and B. Project A costs $60,000 and generates cash flows of $9,000 for 10 years. Project B costs $60,000 and generates cash flows of $2,000 for seven years and then cash flows of $27,000 for three years. Report rates in percentage form to two decimal places i.e. 10.03% not 10% Question 1 (3 points) Calculate what discount rate would make you indifferent between choosing...
Case Study 3--Capital Budgeting (Comprehensive Spreadsheet Problem 11-23, page 408) Your division is considering two projects....
Case Study 3--Capital Budgeting (Comprehensive Spreadsheet Problem 11-23, page 408) Your division is considering two projects. Its WACC is 10%, and the projects' after-tax cash flows (in millions of dollars) would be as follows: Expected Cash Flows Time Project A Project B 0 ($30) ($30) 1 $5 $20 2 $10 $10 3 $15 $8 4 $20 $6 a. Calculate the projects' NPVs, IRRs, MIRRs, regular paybacks, and discounted paybacks. WACC = 10% Use Excel's NPV function as explained in NPVA...
Sandwich Company is considering five independent projects, each of the project will require a $10 million investment. The estimated IRR and cost of capital for these projects are presented as follows: Project A Cost of capital = 12% RR = 14% Project B Cost of capital = 14% IRR = 12% Project C Cost of capital = 8% IRR = 10% Project D Cost of capital = 9% IRR = 10% Project E Cost of capital = 16,5% IRR =...
The Suboptimal Glass Company uses a process of capital rationing in its decision making. The firm's cost of capital is 14 percent. It will Invest only $73,600 this year. It has determined the IRR for each of the following projects: Project Internal Rate of Return 14.ex 8 15. 16.0 Project Size $19,900 25,900 25,900 10,900 19,900 20,900 15,900 17.0 19.0 21.0 a. Pick out the projects that the firm should accept (You may select more than one answer. Click the...
Risk-adjusted discount rates—Basic Country Wallpapers is considering investing in one of three mutually exclusive projects, E, F, and G. The firm's cost of capital, r, is 14.6%, and the risk-free rate, RF, is 10.4%. The firm has gathered the following basic cash flow and risk index data for each project 2 a. Find the net present value (NPV) of each project using the firm's cost of capital. Which project is preferred in this situation? b. The firm uses the following...
You are considering the following two mutually exclusive projects. The required rate of return is 10.75 percent for project A and 12 percent for project B. Which project should you accept and why? Project A -36,000 21,600 18,200 22,100 Project B -69,900 52,600 46,100 Year 1 2 3 0 Project B; because it has the largest total cash inflow Project A; because its NPV is about $796 more than the NPV of Project B Project B; because it returns all...
NPV Your division is considering two projects with the following cash flows millions): Project A 19 Project B 17 a. what are the wojects' Nns assuming the wACC is 5%? Round your answer to two decimal places Do not round your intermediate oalculatio s Enter your ans w $8 $11 $15 $8 s6 maons. .。 example, an answer of $10,50,000 should be entered as 10.5s. Negative value should be indicated by a minus sign Project A Project 8s what are...
Use the following for Questions 1 - 5: You are considering two mutually exclusive projects, A and B. Project A costs $60,000 and generates cash flows of $9,000 for 10 years. Project B costs $60,000 and generates cash flows of $2,000 for seven years and then cash flows of $27,000 for three years. Report rates in percentage form to two decimal places i.e. 10.03% not 10% Question 1 (3 points) Calculate what discount rate would make you indifferent between choosing...
Most questions answered within 3 hours.
-
An Olympic archer misses the bull's-eye 11% of the time.
Assume each shot is independent of...
asked 14 seconds from now -
a gas cylinder in the lab contains 12.0 ft3 of some gas at 70ºF
and 100psia....
asked 50 seconds from now -
Consider the data in the following table regarding the age of a
particular model of car...
asked 4 minutes ago -
She estimates the following model as Rent = β0 + β1 Bedroom + β2
Bath +...
asked 25 minutes ago -
Prove that the following is a valid cumulative distribution
function
F(x) = x/(1+x) for a>=0
0...
asked 54 minutes ago -
Sal's satellite company broadcasts TV to subscribers in Los
Angeles and New York. The demand functions...
asked 16 minutes ago -
1. Sketch the expected Mass Spectrum of Pentane (C5H12)
2. Draw the most stable Newman projection...
asked 52 minutes ago -
Russel Wisselink “Have a plan ready for me by 9:00 a.m. tomorrow
morning” was the instruction...
asked 20 minutes ago -
Write the balanced chemical equation for the reaction between
iodate and bisulfite. Does the order with...
asked 42 minutes ago -
how can you efficiently determine the number of atoms
in a sample of an element?
asked 27 minutes ago -
Calcium dihydrogen phosphate, Ca(H2PO4)2, and sodium hydrogen
carbonate, NaHCO3, are ingredients of baking powder that react...
asked 32 minutes ago -
a car starts from rest at a stop sign. It accelerates
at 4.4m/s² for 7.5s, coasts...
asked 48 minutes ago