Ramco industries choose the best asst from the following two alternatives assets for investment purpo investment...

 

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Ramco industries choose the best asst from the following two alternatives assets for investment purpo investment is decided to be $110 million mobilized from both debt and equity sources in equal propo stock is 0.94, market risk premium 6% and risk free rate at 5% and tax rate applicable to the firm at 40 12%. a) Determine the cost of capital applicable to evaluate the assets b) Apply NPV, IRR & PI methods to evaluate the proposals and suggest the best one. Analyse your resi Investments: Investment Year 0 3 Cash Flows after Tax (CFAT) Year 1 2 3 Asset-A 4 55 55 Asset-B 110 NIL CFAT- Asset-A ($Million) 15 30 45 48 CFAT-Asset-B ($Million) 10 16 28 46 Ramco industries choose the best asst from the following two alternatives assets for investment purpo investment is decided to be $110 million mobilized from both debt and equity sources in equal propo stock is 0.94, market risk premium 6% and risk free rate at 5% and tax rate applicable to the firm at 40 12%. a) Determine the cost of capital applicable to evaluate the assets b) Apply NPV, IRR & PI methods to evaluate the proposals and suggest the best one. Analyse your resi Investments: Investment Year 0 3 Cash Flows after Tax (CFAT) Year 1 2 3 Asset-A 4 55 55 Asset-B 110 NIL CFAT- Asset-A ($Million) 15 30 45 48 CFAT-Asset-B ($Million) 10 16 28 46

Answer rating: 100% (QA)

a Cost of capital Cost of equity Re Riskfree rate Beta Market risk premium Re 5 094 ... View the full answer