The cost of capital: Question 19 options: implies that a project will produce a positive net...
The cost of capital: Question 19 options:
implies that a project will produce a positive net present value only when the rate of return on the project is less than the cost of capital.
will decrease as the risk level of a firm increases.
depends on how the funds are going to be utilized.
is primarily dependent on the source of the funds used in a project.
Homework Answers
Option (d) is correct
The cost of capital is primarily dependent on the source of the funds used in a project. Their combined cost is the weighted average cost of capital whcih is referred to as cost of capital.
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The cost of capital: Question 19 options:
implies that a project will produce a positive net...
can someone help me the assignment is due in 1 h please The cost of capital:...
can someone help me the assignment is due in 1 h please
The cost of capital: depends on how the funds are going to be utilized. O is primarily dependent on the source of the funds used in a project. O implies that a project will produce a positive net present value only when the rate of return on the project is less than the cost of capital. O will decrease as the risk level of a firm increases.
True or False question The after-tax cost of debt generally increases when a firm's bond rating...
True or False question The after-tax cost of debt generally increases when a firm's bond rating decreases. The weighted average cost of capital for a firm is the discount rate which the firm should apply to all of the projects it undertakes. Assigning discount rates to individual projects based on the risk level of each project may cause the firm's overall weighted average cost of capital to either increase or decrease over time. Other things being equal, the weighted average...
Which one of the following is the key factor for determining the cost of capital that...
Which one of the following is the key factor for determining the cost of capital that should be assigned to an individual project? amount of funds requested actual source of funding for the project length of time until the project pays back the requested funds use of the requested funds risk level of the division within the firm that is proposing the project
Suppose Pheasant Pharmaceuticals is evaluating a proposed capital budgeting project (project Alpha) that will require an...
Suppose Pheasant Pharmaceuticals is evaluating a proposed
capital budgeting project (project Alpha) that will require an
initial investment of $400,000. The project is expected to generate
the following net cash flows:
Year
Cash Flow
Year 1
$350,000
Year 2
$475,000
Year 3
$475,000
Year 4
$475,000
Pheasant Pharmaceuticals's weighted average cost of capital is 10%, and project Alpha has the same risk as the firm's average project. Based on the cash flows, what is project Alpha's net present value (NPV)?...
A proposed project has a positive NPV when evaluated at the company cost of capital. If...
A proposed project has a positive NPV when evaluated at the company cost of capital. If the firm employs debt in its capital structure, will the project remain acceptable after evaluation with the WACC? A) there will be no change in the project's NPV. B) the project may now become unacceptable. C) Yes, using the WACC will increase the NPV. D) No, using the WACC will decrease the NPV. Which one?
Suppose Lumbering Ox Truckmakers is evaluating a proposed capital budgeting project (project Alpha) that will require...
Suppose Lumbering Ox Truckmakers is evaluating a proposed capital budgeting project (project Alpha) that will require an initial investment of $450,000. The project is expected to generate the following net cash flows: Year Cash Flow Year 1 $375,000 Year 2 $425,000 Year 3 $500,000 Year 4 $450,000 Lumbering Ox Truckmakers’s weighted average cost of capital is 10%, and project Alpha has the same risk as the firm’s average project. Based on the cash flows, what is project Alpha’s net present...
Suppose Celestial Crane Cosmetics is evaluating a proposed capital budgeting project (project Alpha) that will require...
Suppose Celestial Crane Cosmetics is evaluating a proposed capital budgeting project (project Alpha) that will require an initial investment of $550,000. The project is expected to generate the following net cash flows: Year Cash Flow Year 1 Year 2 Year 3 Year 4 $300,000 $425,000 $500,000 $475,000 Celestial Crane Cosmetics's weighted average cost of capital is 8%, and project Alpha has the same risk as the firm's average project. Based on the cash flows, what is project Alpha's net present...
Suppose Fuzzy Button Clothing Company is evaluating a proposed capital budgeting project (project Alpha) that will...
Suppose Fuzzy Button Clothing Company is evaluating a proposed capital budgeting project (project Alpha) that will require an initial investment of $400,000. The project is expected to generate the following net cash flows: Year Cash Flow Year 1 $300,000 Year 2 $450,000 Year 3 $450,000 Year 4 $400,000 Fuzzy Button Clothing Company’s weighted average cost of capital is 8%, and project Alpha has the same risk as the firm’s average project. Based on the cash flows, what is project Alpha’s...
Consider this case: Suppose Happy Dog Soap Company is evaluating a proposed capital budgeting project (project...
Consider this case: Suppose Happy Dog Soap Company is evaluating a proposed capital budgeting project (project Alpha) that will require an initial investment of $550,000. The project is expected to generate the following net cash flows: Year Cash Flow Year 1 Year 2 Year 3 Year 4 $325,000 $500,000 $450,000 $425,000 Happy Dog Soap Company's weighted average cost of capital is 9%, and project Alpha has the same risk as the firm's average project. Based on the cash flows, what...
Suppose Lumbering Ox Truckmakers is evaluating a proposed capital budgeting project (project Alpha) that will require...
Suppose Lumbering Ox Truckmakers is evaluating a proposed capital budgeting project (project Alpha) that will require an initial investment of $550,000. The project is expected to generate the following net cash flows: Year Year 1 Year 2 Year 3 Cash Flow $375,000 $425,000 $500,000 Year 4 $400,000 The company's weighted average cost of capital is 8%, and project Alpha has the same risk as the firm's average project. Based on the cash flows, what is project Alpha's net present value...
can someone help me the assignment is due in 1 h please
The cost of capital: depends on how the funds are going to be utilized. O is primarily dependent on the source of the funds used in a project. O implies that a project will produce a positive net present value only when the rate of return on the project is less than the cost of capital. O will decrease as the risk level of a firm increases.
Which one of the following is the key factor for determining the cost of capital that should be assigned to an individual project? amount of funds requested actual source of funding for the project length of time until the project pays back the requested funds use of the requested funds risk level of the division within the firm that is proposing the project
Suppose Pheasant Pharmaceuticals is evaluating a proposed
capital budgeting project (project Alpha) that will require an
initial investment of $400,000. The project is expected to generate
the following net cash flows:
Year
Cash Flow
Year 1
$350,000
Year 2
$475,000
Year 3
$475,000
Year 4
$475,000
Pheasant Pharmaceuticals's weighted average cost of capital is 10%, and project Alpha has the same risk as the firm's average project. Based on the cash flows, what is project Alpha's net present value (NPV)?...
Suppose Celestial Crane Cosmetics is evaluating a proposed capital budgeting project (project Alpha) that will require an initial investment of $550,000. The project is expected to generate the following net cash flows: Year Cash Flow Year 1 Year 2 Year 3 Year 4 $300,000 $425,000 $500,000 $475,000 Celestial Crane Cosmetics's weighted average cost of capital is 8%, and project Alpha has the same risk as the firm's average project. Based on the cash flows, what is project Alpha's net present...
Consider this case: Suppose Happy Dog Soap Company is evaluating a proposed capital budgeting project (project Alpha) that will require an initial investment of $550,000. The project is expected to generate the following net cash flows: Year Cash Flow Year 1 Year 2 Year 3 Year 4 $325,000 $500,000 $450,000 $425,000 Happy Dog Soap Company's weighted average cost of capital is 9%, and project Alpha has the same risk as the firm's average project. Based on the cash flows, what...
Suppose Lumbering Ox Truckmakers is evaluating a proposed capital budgeting project (project Alpha) that will require an initial investment of $550,000. The project is expected to generate the following net cash flows: Year Year 1 Year 2 Year 3 Cash Flow $375,000 $425,000 $500,000 Year 4 $400,000 The company's weighted average cost of capital is 8%, and project Alpha has the same risk as the firm's average project. Based on the cash flows, what is project Alpha's net present value...
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