Homework Answers
Solution :
1) Since internal cost is 7% so the company need to invest in the options that gives more return than 7%. In the given option, investment A and C gives more return than 7% hence the company can chose to invest in these.
Correct option is C) A and C only
2) Optimum capital budget is the point where marginal return on capital and marginal cost intersects.
Hence correct option is A)
3)
First step in evaluating the cash flow is to determine the need of the project then breakdown the projects key element then evaluate the cash flow then determine whether to do the project.
Hence correct option is C ) Determine the project's need
4) Payback period is the time required to recover the initial investment . Eg if you invest 100 in year 0 and receives 50 in year 1 and 50 in year 2 then payback period will be 2 years.
5)
Optimum capital budget is the set of projects that maximises the company value and minimises the cost.
Correct option is C) maximises the company value
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Question 1 (1 point) Company A has an internal cost of capital of 7% annually. It...
Question 1 (1 point) John is evaluating which investment would be best for his company. He...
Question 1 (1 point) John is evaluating which investment would be best for his company. He wants to determine the future value of a certain investment that has the following information: PV = $200 INT = 0.1 or 10% N = 1 (years) According to this information, what would be the future value of this investment? $110.67 $200.50 $220 None of the above Question 2 (1 point) Which of the following is a key component of discounted cash flows? Periods...
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What is Odarian's weighted average cost of capital? Use the NPV function in Excel to find...
What is Odarian's weighted average cost of
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Use the NPV function in Excel to find the project's
NPV? Should Odarian open the coffee s
hop? Explain.
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What is Odarian's weighted average cost of
capital?
Use the NPV function in Excel to find the project's
NPV? Should Odarian open the coffee s
hop? Explain.
3. Consider the following information for Odarian, Inc. Odarian's target capital structure is 38% long-term debt, 15% preferred stock and 67% equity. The firm has one outstanding 8.03% bond issue that matures on November 7, 2039 makes semiannual payments, and currently sells for $851 per bond. Assume that November 7, 2019, is the...
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