First question is being answered here:
1. Option (a) is correct
Net Present value (NPV) is the present value of future cash inflows minus the initial investment.
First we will calculate the present value of cash inflows as per below:
Here we will use the following formula:
PV = FV / (1 + r%)n
where, FV = Future value, PV = Present value, r = rate of interest = 5%, n= time period
For calculating the present value the given cash flows, we will calculate the present values of all the years and add them up. Now,putting the values in the above equation, we get,
PV = $30000 / (1 + 5%)+ $40000 / (1 + 5%)2 + $50000 / (1 + 5%)3 + $60000 / (1 + 5%)4 + $70000 / (1 + 5%)5
PV = $30000 / (1 + 0.05)+ $40000 / (1 + 0.05)2 + $50000 / (1 + 0.05)3 + $60000 / (1 + 0.05)4 + $70000 / (1 + 0.05)5
PV = $30000 / (1.05)+ $40000 / (1.05)2 + $50000 / (1.05)3 + $60000 / (1.05)4 + $70000 / (1.05)5
PV = $28571.43+ ($40000 / 1.1025) + ($50000 / 1.57625) + ($60000 / 1.21550625) + ($70000 / 1.27628)
PV = $28571.43 + $36281.18 + $43191.88 + $49362.15 + $54846.90
PV = $212253.47
So, required present value is $212253.47
Initial investment = $200000
Net present value (NPV) = Present value of cash flows - Initial investment
Net Present value (NPV) = $212253.47 - $200000 = $12253.47
ZYZ Inc. is considering a project with the following cash flows: Year Cash Flow (CF) 0...
ZYZ Inc. is considering a project with the following cash flows: Year Cash Flow (CF) 0 -$200,000 1 $30,000 2 $40,000 3 $50,000 4 $60,000 5 $70,000 If the discount rate is 5%, what is the NPV of the proposed project? Question 3 options: $11,572.99 $12,253.47 $21,009.43 $10,572.99
ZYZ Inc. is considering a project with the following cash flows: Year Cash Flow (CF) 0 -$200,000 1 $30,000 2 $40,000 3 $50,000 4 $60,000 5 $70,000 If the discount rate is 5%, what is the NPV of the proposed project? Question 37 options: $11,572.99 $10,572.99 $21,009.43 $12,253.47
According to the trade-off theory, a firm's optimal capital structure: Question 8 options: is the debt-equity ratio that results in the lowest possible weighted average cost of capital. exists when the debt-equity ratio is 0.50. is the debt-equity ratio that exists at the point where the firm's weighted after-tax cost of debt is minimized. is found by locating the mix of debt and equity which causes the earnings per share to equal exactly $1.
According to the trade-off theory, a firm's optimal capital structure: Question 11 options: exists when the debt-equity ratio is 0.50. is the debt-equity ratio that results in the lowest possible weighted average cost of capital. is found by locating the mix of debt and equity which causes the earnings per share to equal exactly $1. is the debt-equity ratio that exists at the point where the firm's weighted after-tax cost of debt is minimized.
please somebody help me answer this, the assignment is due in 1h According to the trade-off theory, a firm's optimal capital structure: is the debt-equity ratio that exists at the point where the firm's weighted after- tax cost of debt is minimized. is the debt-equity ratio that results in the lowest possible weighted average cost of capital. exists when the debt-equity ratio is 0.50. is found by locating the mix of debt and equity which causes the earnings per share...
3. Consider Table 2 Table 2 Year 3 Year 4 Cash flow Year 2 Year 0 Year 1 Cash flovw Cash flow Cash flow 70 Cash flow Project 80 70 30 -150 0.24 Interest Tax Shield 0.75 (a)Consider Table 2. Calculate the net present value of the project assuming it is all-equity financed. The required return on unlevered equity is 15%. (b)Consider Table 2. Assume for now that the project is financed using equal parts debt and equity. The cost...
Aardvark Industries is considering a project that will generate the following free cash flows: Year 0 1 2 3 Free Cash Flows ($200) $100 $80 $60 You are also provided with the following market value balance sheet and information regarding Aardvark's cost of capital: Assets Liabilities Cost of Capital Cash 0 Debt 400 Debt 7% Other Assets 1000 Equity 600 Equity 12% τc 35% A. Aardvark's unlevered cost of equity is closest to: A) 10.0% B) 10.4% C) 9.5% D)...
what is the answer? i accidentally selected the first one ZYZ Inc. is considering a project with the following cash flows: Year Cash Flow (CF) 0 - $200,000 1 $30,000 2 $40,000 3 $50,000 4 $60,000 5 $70,000 If the discount rate is 5%, what is the NPV of the proposed project? $12,253.47 $11,572.99 $10,572.99 $21,009.43
A firm is considering a project that will generate perpertual after-tax cash flows of 25,000 per year beginning next year. The project has the same risk as the firm's overall operations. Equity cost 15%and debt cost 6% on an after-tax basis. The firm's D/E ratio is 1.2. What is the most the firm can pay for the project and still earn its required return?
A project has the following cash flows. Cash flows are paid at year-end. Year CF 2017 - $200 2018 +$80 2019 +$80 2020 +$80 2021 +$80 What is the payback period if the opportunity cost of capital (OCC) is 11%? 4.0 years 3.0 years 5.0 years 2.0 years What's the profitability index of the project in Question 5, if the opportunity cost of capital is 11%? 0.241 0.5 0.19 0.452