Oak Enterprises accepts projects earning more than the firm's 15% cost of capital. Oak is currently considering

Fantastic news! We've Found the answer you've been seeking!

Question:

Oak Enterprises accepts projects earning more than the firm's 15% cost of capital. Oak is currently considering a 10-year project that provides annual cash inflows of $10,000 and requires an initial investment of $61,450. (Note: All amounts are after taxes.)

a.Determine the IRR of this project. Is it acceptable?

b.Assuming that the cash inflows continue to be $10,000 per year, how many additional years would the flows have to continue to make the project acceptable (that is, to make it have an IRR of 15%)?

c.With the given life, initial investment, and cost of capital, what is the minimum annual cash inflow that the firm should accept?

Posted Date: May 18, 2024 06:09 PM

See More Questions

Slip Systems had no short-term investments prior to 2015. It had the following transactions involving short-term investments in available-for-sale securities during 2015. Feb. 6 Purchased 3,400...
An 8-in.-OD horizontal steam pipe carries 220 lbm/h dry saturated steam at 250F. If ambient air temperature is 70F, determine the rate of condensate flow at the end of 10 ft of pipe. Use an...
n = 5, p = 0.7, P(3) In Exercises 1726, determine the indicated probability for a binomial experiment with the given number of trials n and the given success probability p. Then find the mean,...
(Car leasing) Youre considering leasing or purchasing a car. The details of each method of financing are given below: a. The lease is for 24 months. What should you do? b. What will be your answer if...
McCracken Roofing, Inc., common stock paid a dividend of $1.20 per share last year. The company expects earnings and dividends to grow at a rate of 5% per year for the foreseeable future. a. What...
A1200 kg aircraft going40 m/s collides with a2500 kg aircraft that is parked and they stick together after the collision and are going13 m/s after the collision. If they skid for 127.5 m before...
Exercise 10-2 (Algo) Residual Income (LO10-2] Juniper Design Limited of Manchester, England, is a company specializing in providing design services to residential developers. Last year the company...
In a survey, 500 adults were asked to identify "what is inappropriate in the workplace." Of the 500 subjects, 74% said that miniskirts were not appropriate in the workplace. a. What is 74% of 500? b....
The figure shows a link OA of length d m that is pinned at O and rotates with an angular velocity w rad/s, and an angular acceleration a rad/s, as shown. A cable is attached to the end A of the link,...
Motion Ltd issued $5 million in redeemable preference shares in a private placement on 1 July 2012. The shares are redeemable on 30 June 2016, have no voting rights and offer a fixed rate of return...
Your sports company has labor costs and overhead totaling $2.6 million during a given period. The company purchased $10.5 million of materials during the period and used $10 million of this amount....
If Company Z has a beta of 1.3, the market return is 14%, and the risk-free rate is 3%, what is the company's cost of equity capital?
You are considering investing in a process that is a cost-cutting proposal. The process has an initial cost of $225 and will be depreciated straight-line to zero over its 3-year life. Assume a 34%...
A consultant is beginning work on three projects. The expected profits from these projects are $50,000, $72,000, and $40,000. The associated standard deviations are $10,000, $12,000, and $9,000....
a. Better synchronization of cash inflows and outflows would allow the firm to keep its transactions balance at a minimum, and would therefore lower the target cash balance. b. Improved sales...
From an employer's standpoint, the defined benefit plan's major advantage is promotion of low employee turnover. The economic consequences of job-changing are not desirable under a defined benefit...
Ideally, the employee will choose the plan that provides the incremental cash flows (both costs and benefits) that maximize the employee's expected utility of consumption. However, there are many...

Oak Enterprises accepts projects earning more than the firm's 15% cost of capital. Oak is currently considering

Question:

Expert Answer:

Students also viewed these finance questions