Marian Plunket owns her own business and is considering an investment. If she undertakes the investment, it
Question:
Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of...
Step by Step Answer:
Plan Draw the timeline of the cash flows for the investment opportunity Compute t...View the full answer
Related Video
NPV stands for \"Net Present Value,\" which is a financial concept used to determine the value of an investment or project. It measures the difference between the present value of cash inflows and the present value of cash outflows over a given period of time, using a specific discount rate. To calculate the NPV of an investment, you need to first estimate the cash inflows and outflows associated with the investment, and then discount them back to their present values using a discount rate. The discount rate represents the cost of capital or the expected rate of return required by investors. The formula for calculating NPV is: NPV = sum of (cash inflows / (1 + discount rate)^t) - sum of (cash outflows / (1 + discount rate)^t) Where: Cash inflows: the expected cash received from the investment Cash outflows: the expected cash paid out for the investment Discount rate: the required rate of return or the cost of capital t: the time period in which the cash flow occurs If the NPV is positive, it means that the investment is expected to generate a return higher than the required rate of return or the cost of capital, and it may be considered a good investment. If the NPV is negative, it means that the investment is not expected to generate a return higher than the required rate of return or the cost of capital, and it may be considered a bad investment.
Students also viewed these Corporate Finance questions
-
Renuka Gupta owns her own business and is considering an investment. If she undertakes the investment, it will pay $4000 at the end of each of the next three years. The opportunity requires an...
-
The Goodwrench Garage is considering an investment in a new tune-up computer. The cost of the computer is $48,000. A cost analyst has calculated the discounted present value of the expected cash...
-
The CarCare Garage is considering an investment in a new tune-up computer. The cost of the computer is $48,000. A cost analyst has calculated the discounted present value of the expected cash flows...
-
Create a Stored Procedure: Stored procedures allow you to make changes to the database structure and manage performance without needing to rewrite applications or deploy application updates. In this...
-
Alicia, Bob and Carol are equal partners in, Dunning Law Associates. In 2010, Alicia, in an attempt to maximize the firms return on its investment portfolio, encourages her partners to acquire...
-
a) AAA (Accounting, Authentication, Authorisation) is a framework for configuring three independent security functions consistently. Which one of the "3As" is each of these most closely related to?...
-
Explain how and why the method of instrumental variables allows us to estimate the labor demand elasticity.
-
Rancco Inc. reported total sales of $73 million last year, including $13 million in revenue (labor, sales to tax-exempt entities) exempt from sales tax. The company collects sales tax at a rate of...
-
During a visit to Surrey, Jassa gets into conversation with the owner of a local restaurant, Maharaja Catering. The owner of Maharaja tells Jassa he is willing to sell samosas for $1.25 each to...
-
Jimmy owns a garden in which he has planted N trees in a row. After a few years, the trees have grown up and now they have different heights. Jimmy pays much attention to the aesthetics of his...
-
You have been offered a unique investment opportunity. If you invest $10,000 today, you will receive $500 one year from now, $1500 two years from now, and $10,000 ten years from now. a. What is the...
-
Your factory has been offered a contract to produce a part for a new printer. The contract would last for three years and your cash flows from the contract would be $5 million per year. Your upfront...
-
Determine the force in each member of the truss. State if the members are in tension or compression. D 300 lb -2 ft + -2 ft- Prob. F6-2 B A 3 ft
-
What is true about the following code? (Choose two.) A. The code compiles successfully. B. One line does not compile. C. Two lines do not compile. D. Three lines do not compile. E. If any lines that...
-
What is the expected output of the following code snippet? A. It does not compile. B. It throws an exception at runtime. C. It does not print any output at runtime. D. 345345 E. 334455 F. The...
-
What does the following output? A. a B. The code runs successfully without any output. C. The code does not complete. D. The code compiles but throws an exception at runtime. var chars =...
-
Given a parallel Stream , which method would you use to obtain an equivalent serial Stream ? A. unordered() B. reduce() C. concat() D. stream() E. boxed() F. None of the above
-
What is a possible output of the following application? A. {1975=[Escort], 1967=[ Mustang, Thunderbird]} B. {Escort=[1975], Thunderbird=[1967], Mustang=[1967]} C. The code does not compile. D. The...
-
An agreement between competitors to fix prices is a per se violation of antitrust law. (True/False)
-
Four GWU students have been selected to taste food sold by 3 different food trucks labeled as food truck A, B and C on H & 22nd Streets every Monday for 3-weeks. For each student, food trucks are...
-
Write the symbol, including atomic number, mass number, and charge, for each of the following species. (a) A neutral noble-gas element with 21 neutrons in its nucleus (b) An alkaline earth metal...
-
Interpreting Bond Yields Is the yield to maturity on a bond the same thing as the required return? Is YTM the same thing as the coupon rate? Suppose today a 10 percent coupon bond sells at par. Two...
-
Interpreting Bond Yields Is the yield to maturity on a bond the same thing as the required return? Is YTM the same thing as the coupon rate? Suppose today a 10 percent coupon bond sells at par. Two...
-
Interpreting Bond Yields Suppose you buy a 7 percent coupon, 20-year bond today -when its first issued. If interest rates suddenly rise to 15 percent, what happens to the value of your bond? Why?
-
Privack Corporation has a standard cost system in which it applies overhead to products based on the standard direct labor-hours allowed for the actual output of the period. Data concerning the most...
-
HomeLife Life Insurance Company has two service departments ( actuarial and premium rating ) and two production departments ( advertising and sales ) . The distribution of each service department s...
-
Otsego Industries manufactured 300,000 units of product last year and identified the following costs associated with the manufacturing activity: Variable costs: Direct materials used Direct labor...
Study smarter with the SolutionInn App