Question #1 Talent Inc. is considering a project that has the following cash flow and WACC data.
Question:
Question #1
Talent Inc. is considering a project that has the following cash flow and WACC data.
WACC: 12%
Year 0 1 2 3
Cash flows -$1,500 $500 $600 $700
(1) What is the project's NPV?
(2) What is the project's IRR?
(3) What is the project's Payback Period?
(4) What is the project's Discounted Payback Period?
Question #2
Part 1: Dallas Star Inc. 's stock has a 40% chance of producing a 5% return, and a 60% chance of producing a 15% return. What is the firm's expected rate of return? What is the firm's Standard Deviation? What is the firm's Coefficient of Variation?
Part 2: Calculate the required rate of return for Dallas Star Inc., assuming that (1) the nominal risk-free rate is 5%, (2) expected market return is 10% and (3) the firm has a beta of 2. (Hint: You need to find out market risk premium first.)
Fundamentals of Financial Management
ISBN: 978-0324597707
12th edition
Authors: Eugene F. Brigham, Joel F. Houston