Question

initty of sos.o0o.ouo suppose the Invested is expescted to hosstignet ar -$37,000.000 Vear $12,0 n"ance thi. "'vestment ehey İtan on using combination of cash and stock. Our bankers Vtoissue 60% bonds at rale of 3.5%, and 40% stock at a rate of 19% ls the project have the actual NPV fijure) Suppose in onder worth considering? Why or why nor (onswer muast 2 is the yield to maturity? Suppose there's a 30% very rate. Suppose in the event of a "one year bond at Sooo with a coupon or 7%. What probabílity of default, and in the event of a default there would be a 65% reco eratit the company would pay zero interest back. What is the expected return on the bond? 3, Using the attached financial st with the money? (no partial credit if any of the steps are wrong) atements, calculate free cash flow? If positive, what do you suggest the cimpany does You buy a building for 1.1 Million fully rented. The ROI on the building us l 9.3%, and inflation is 3.8%, what is the nominal rate of return? What is the real rate? (nominal rate real rate + iniflation + (inflationxreal rate)(worth 5. We are considering 2 investments for purchase. One is Google and the other is Amazon. Google has a beta of 2.7 and Amazon has a Beta of2.4. Assume a risk free rate of 3%, and an expected market return of 7%. Using CAPM. what are the expected reutns on each stock? 6. What is the annual compound interest rate ofan investment with a stated interest rate of 7%, compounded quarterly for nine years? (worth .5)

Answer 1

Answer to Question 1:

WACC = (Weight of Bond * Cost of Bond) + (Weight of Stock * Cost of Stock)
WACC = (0.60 * 0.035) + (0.40 * 0.19)
WACC = 0.097 or 9.70%

Cash inflow | PV Factor @ 9.7%) PV of Cash Inflow Year 117,000,000 0.9116 15,496,809 23,000,000 ()·추십 10 19,112,372 318,000,000 412,000,000 0.690513,654,921 8,286,187 0.7575 PV of Cash Inflow 56,530,289 NPVPV of Cash Inflow - Initial Investment NPV $56,530,289 $65,000,000 NPV--$8,469,711 Conclusion: No, Project is not worth considering as it has negative NPV