Question: pleaseeee explain i want to really understand this Using the information below for questions #5 -#8. Threes Company is evaluating a new project. Threes has
pleaseeee explain i want to really understand this Using the information below for questions #5 -#8. Threes Company is evaluating a new project. Threes has to invest $500,000 into the project now, and, then, the firm expects to receive (after-taxes) cash inflows from this project as below: Year 1 $125.000 Year 2 $186,000 Year 3 $225,000 Year 4 $190,000 Year 5 $140,000 Threes uses the CAPM in estimating cost of equity capital. Threes Co's estimates on the CAPM variables are as follows: the project's beta = 1.50; the risk-free rate=4%; and the return on the market portfolio - 12% during the project's life, respectively. Threos Co's income tax rate is 40%. Throes Co. has no long-term bonds outstanding (i.c., all equity firm) 5. What is the cost of cquity of Throes Company? a. 4% b. 8% c. 12% d. 16% e. 20% 6. What is the internal rate of return (IRR) of the project? a. 4.0% b. 12.0% c. 16.0% d. 21.0% e. 25.0% 7. What is the payback (PB) period of the project? a. Longer than 5 years. b. Close to 5 years, c. Close to 4 years. d. Close to 3 years e. Less than 3 years. 8. What is the NPV of the new project? a $11.430 b S600
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