Question

12. Asume you ore trying to compore Project Alphe no Project Beto. Both peojecs hove the some appropriate discount rate. Projedt Alpha generates infinite aher tax cosh flows which do not grow the first cosh flow is $8OM one yeor from now (T 1) ando $600M today (T-O, Project Beto generones infinite after tax eash flows which do not grow the fist cosh Flow is $40M one year from now Project Beta is most acurate o. "" e appropriate discount rate for both projects was belemわe crossover rate of 12206 Projec, Alpha b. " the opproprione disco rene tor both projects wos belete crossover rote of ㅨ, Projec, Alphe e H the appropriate discount rate for bolth projects was aboye the croisover nate of 44% Projed Alphe would have a better NW than Project Beto would have a better NW thon Project Beta would have a better NPV than Projedt Beto "" e appropriate discount rane for both projects won bele vodd her, o better NPV ton Preieơ Beto e, e crossover rate of 290% Projed Alpha 13. You owe your credit company $50,000 and plan to make no payments on your credie cord for 1.0 year Your ceedit cord company arrently charges youon APR of 20.0% you make enersto-er. your credit score by 100 poin, your credit card company will odhat your APR by 40%. As rese 이 you efforh, how much leis interest would you pay over 1.0 yeor $1,386 b. $2,000 e $2,356 d $2,443 e. 3,412 use the felowing information about Company X to help onswer questions 14.20 Compony X went public ot the tort of 2017, Ar the Sme of the IPO the compony Iwed 200M shares of stock at $25 per share (us rasing $500M in equity) Iwwed $400M of long term deba os port of this jnte rest only loon, the compory ogreed to poy credeor, 15.0% per yeeri this implies tie current portion of long term dei S0m 2017/2018 At the end of 2017, Compony X issued fnendial shatements, A complete summary is below * $400м ī, sales, $260M in operating earning, and $160 in net income $500M Gross PPE, $450 Net PPE . Working Capital of $430, eaduding marketable securities The company paid a dividend of 30 cents per share * Inve9ers were pleased with no reves; Company X's shoe price closed e, $28 per there Al the end of 2018, Compony X hsued finanoal statements. A complete sunmory h below $48OM in sales, 3300M in operating earnings, and $200 in net Income .$600M Gress PPE, $490 Net PPE Working Copital of $460, excluding marketable securities The compony poid o dividend of 40 cents per shore Inveton were pleased with the results Company X's share price closed at $33 per hare Throughout 2017 and 2018 The company did not issue or repurchase any shares of stock ofher than during the PO The compony did not issue or retire ony long erm debt other thon during the initial debr offering

Answer 1

12. Option a is correct

If Cross over rate is less than 13.33% Project Alpha NPV is better than Project Beta NPV.

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