A firm has shortlisted the following two alternative projects for investment of $120 million. The investment...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
A firm has shortlisted the following two alternative projects for investment of $120 million. The investment amount is proposed to be mobilized from the following sources. Debt: $78million @12% cost Equity $42 million @ 14% cost (a) Determine the appropriate cost to evaluate the alternative two projects if the tax rate applicable for the firm is 30%. (b) Apply appropriate (at least two) techniques and find the best alternative project for investment purpose. Year 1 2 3 4 Cash flow after tax, Project A Cash flow after tax Project B ($ Million) ($ Million) 74 62 54 12 10 26 34 79 NB: the rates should be rounded off to the nearest whole number, like- if 10.45 take 10% or if 10.56, take 11% and so on. A firm has shortlisted the following two alternative projects for investment of $120 million. The investment amount is proposed to be mobilized from the following sources. Debt: $78million @12% cost Equity $42 million @ 14% cost (a) Determine the appropriate cost to evaluate the alternative two projects if the tax rate applicable for the firm is 30%. (b) Apply appropriate (at least two) techniques and find the best alternative project for investment purpose. Year 1 2 3 4 Cash flow after tax, Project A Cash flow after tax Project B ($ Million) ($ Million) 74 62 54 12 10 26 34 79 NB: the rates should be rounded off to the nearest whole number, like- if 10.45 take 10% or if 10.56, take 11% and so on.
Expert Answer:
Answer rating: 100% (QA)
a To determine the appropriate cost to evaluate the two projects we will calculate the weighted aver... View the full answer
Related Book For
Principles Of Managerial Finance
ISBN: 978-0136119463
13th Edition
Authors: Lawrence J. Gitman, Chad J. Zutter
Posted Date:
Students also viewed these finance questions
-
CANMNMM January of this year. (a) Each item will be held in a record. Describe all the data structures that must refer to these records to implement the required functionality. Describe all the...
-
In general, students are expected to meet the following objectives: 1) To ascertain cost of capital for a new project by using cost of capital of existing firms operating in the same business. (2)...
-
Rand Medical manufactures lithotripters. Lithotripsy uses shock waves instead of surgery to eliminate kidney stones. Physicians' Leasing purchased a lithotripter from Rand for $2,000,000 and leased...
-
Refer to the data in Exercise 15-2 for Weller Corporation, Comparative financial statements for Weller Corporation, a merchandising company, for the year ending December 31 appear below. The company...
-
Find the following for the system shown in Figure P5.17: a. The equivalent single block that represents the transfer function, T(s) = C(s)/R(s). b. The damping ratio, natural frequency, percent...
-
Explain what type of stability the aircraft would exhibit if the CG is behind the CL.
-
Consider the following condensed financial statements of Money Freedom, Inc. The companys target rate of return is 10%. Requirements 1. Calculate the companys ROI. Round all of your answers to four...
-
A model that I have discussed before was a decision tree model, this type of model helps to weigh the different outcomes that can occur from making a certain decision. In my job, I may not use a...
-
In Part III (Appendix 11B) of the audit case, the audit staff of Adams, Barnes & Co. identified specific revenue risks on working paper RA-12 (page 494). However, the Summary of Audit Approach...
-
You just won a contest and have been appointed State of CT Tax Commissioner (you might be asking, why did I enter such a contest? :)). Your primary goal is twofold: raise revenue and make the tax...
-
What impact does the integration of digital tools and platforms have on organizational structures, particularly in relation to remote work and virtual collaboration ?
-
1. Do the radial wavefunction of the hydrogen atom depend on the mass of the electron, or on the mass of the proton, or on both masses, or on neither of these masses. Explain your reasoning very...
-
Let T: R R be a mapping defined by T(x, y, z)=(3x-5y, 2x + z) 1. Is T a linear transformation? Verify your answer? 2. Find [T] the standard matrix that represents T ? 4 3. Find T( -1 |)? -3
-
Culture" impact the course of hominid evolution. how did the changing cultural behavior of early Homo influence biological evolution, resulting in modern Homo sapiens? Make sure that you include two...
-
Example 4: Let f(x)= log(x-4x+7)-log(x+3). What are all the values of x for which f(x)>0? Example 5: Let g(x) = In(x+x-5) and let h(x)= In(x+4). What are all values of x for which g(x)
-
Calculate total asset value given the following information: ROA = 5%; Total equity = $600,000 and ROE = 8%. A. $960,000 B. $1,100,000 C. $1,200,000 D. $1,300,000 E. $1,400,000
-
1. What are some current issues facing Saudi Arabia? What is the climate for doing business in Saudi Arabia today? 2. Is it legal for Auger's firm to make a payment of $100,000 to help ensure this...
-
The actual sales and purchases for Xenocore, Inc., for September and October 2012, along with its forecast sales and purchases for the period November 2012 through April 2013, follow. The firm makes...
-
Max Small has outstanding school loans that require a monthly payment of $1,000. He needs to purchase a new car for work and estimates that this will add $350 per month to his existing monthly...
-
You are interested in purchasing the common stock of Azure Corporation. The firm recently paid a dividend of $3.00 per share. It expects its earningsand, hence, its dividendsto grow at a rate of 7%...
-
A conducting loop having radius \(20 \mathrm{~cm}\) is held fixed, and there is a magnetic flux of \(0.6 \mathrm{~T} . \mathrm{m}^{2}\) through the loop. When the magnetic field is turned off, the...
-
A rectangular loop of length \(\ell=4 \mathrm{~cm}\), width \(w=3 \mathrm{~cm}\), and internal resistance \(R=0.5 \mathrm{~V} / \mathrm{A}\) is located so that the normal to the loop is parallel to a...
-
Suppose you are fabricating a device to measure the orientation of the Erath's magnetic field (i.e., \(50 \mu \mathrm{T}\) ). The device can accommodate a single conducting coil attached to a motor...
Study smarter with the SolutionInn App