12/2023-5:00p.m. Student ID: Financial Management (FNCE 623) Time: 70 minutes ATTEMPT ALL QUESTIONS 1. Diamond Mining...

 

 

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12/2023-5:00p.m. Student ID: Financial Management (FNCE 623) Time: 70 minutes ATTEMPT ALL QUESTIONS 1. Diamond Mining Corporation is trying to evaluate a project with the following cash flows: Year Cash flow 0 (655.000) 1 200,000 2 200,000 3 (20,000) 4 200,000 5 300,000 a) As a financial manager, do you suggest they evaluate the project using NPV, IRR, or both? Why? b) Should the company accept this project if it requires a 11% return on its investments? Why? (6 marks 2. Amazing company Ltd. has 8.2 million shares of common stock outstanding and 195,000 semi-ann bonds outstanding with a face value of $1,000 and a 9.5% coupon rate. The common stock currently s for $208 per share and has a beta of 1.02, and the bonds have 18 years to maturity and sell for 91% of value. The market risk premium is 5.3%, T-bills (risk-free) yield 5%, and the company's tax rate is a) What is the firm's market value capital structure? b) Estimate the firm's cost of equity, and after tax cost of debt. (c) Estimate the company's total cost of capital. (16 1 12/2023-5:00p.m. Student ID: Financial Management (FNCE 623) Time: 70 minutes ATTEMPT ALL QUESTIONS 1. Diamond Mining Corporation is trying to evaluate a project with the following cash flows: Year Cash flow 0 (655.000) 1 200,000 2 200,000 3 (20,000) 4 200,000 5 300,000 a) As a financial manager, do you suggest they evaluate the project using NPV, IRR, or both? Why? b) Should the company accept this project if it requires a 11% return on its investments? Why? (6 marks 2. Amazing company Ltd. has 8.2 million shares of common stock outstanding and 195,000 semi-ann bonds outstanding with a face value of $1,000 and a 9.5% coupon rate. The common stock currently s for $208 per share and has a beta of 1.02, and the bonds have 18 years to maturity and sell for 91% of value. The market risk premium is 5.3%, T-bills (risk-free) yield 5%, and the company's tax rate is a) What is the firm's market value capital structure? b) Estimate the firm's cost of equity, and after tax cost of debt. (c) Estimate the company's total cost of capital. (16 1