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Umnica [9.8K]
3 years ago
5

A project has cash flows of -$152,000, $60,800, $62,300, and $65,000 for years 0 to 3, respectively. The required rate of return

is 13 percent. Based on the internal rate of return of _____ percent for this project, you should _____ the project. a. 14.67; accept b. 13.96; accept c. 11.32; reject d. 10.91; reject e. 18.46; reject
Business
1 answer:
Blababa [14]3 years ago
7 0

Answer:

c. 11.32; reject

Explanation:

The IRR is the rate at with net present value equals zero.

-152,000 + \frac{60,800}{1+IRR} +\frac{62,300}{(1+IRR)^{2} } +\frac{65,000}{(1+ IRR)^{3} } = 0

\left[\begin{array}{cc}Period&Cash Flow\\0&-152,000\\1&+60,800\\2&+62,300\\3&+65,000\\4&0.113237029\\\end{array}\right]

To solve it you use excel or a financial calculator:

0.1132370

Because the IRR is lower than minimun aceptable rate of return, the project should be rejected.

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Suppose now that there is not enough internal cash flow and the firm must issue new shares of stock. Qualitatively speaking, wha
ivanzaharov [21]

Complete question:

WACC Estimation

On January 1, the total market value of the Tysseland Company was $60 million. During the year, the company plans to raise and invest $20 million in new projects. The firm's present market value capital structure, here below, is considered to be optimal. There is no short-term debt.

Debt $30,000,000

Common equity 30,000,000

Total capital $60,000,000

 New bonds will have an 7% coupon rate, and they will be sold at par. Common stock is currently selling at $30 a share. The stockholders' required rate of return is estimated to be 12%, consisting of a dividend yield of 4% and an expected constant growth rate of 8%. (The next expected dividend is $1.20, so the dividend yield is $1.20/$30 = 4%.) The marginal tax rate is 40%.

1. In order to maintain the present capital structure, how much of the new investment must be financed by common equity? Enter your answer in dollars. For example, $1.2 million should be entered as $1200000.

$  

2. Assuming there is sufficient cash flow for Tysseland to maintain its target capital structure without issuing additional shares of equity, what is its WACC? Round your answer to two decimal places.

%

3. Suppose now that there is not enough internal cash flow and the firm must issue new shares of stock. Qualitatively speaking, what will happen to the WACC? No numbers are required to answer this question.

I. rs will increase and the WACC will decrease due to the flotation costs of new equity.

II. rs will decrease and the WACC will increase due to the flotation costs of new equity.

III. rs and the WACC will not be affected by flotation costs of new equity.

IV. rs and the WACC will increase due to the flotation costs of new equity.

V. rs and the WACC will decrease due to the flotation costs of new equity.

-Select- one above IIIIIIIVV

Answer:

The answer is III.

rs and the WACC will increase due to the flotation costs of new equity.

Solution:

It is given that,

Equity is $30,000,000.

Debt is $30,000,000.

The amount of fund raised is $20,000,000.

The formula to calculate weight of equity is given below:

Weight of equity = \frac{Equity}{Equity+Debt}

Substitute $30,000,000 for equity and $30,000,000 for debt in the formula,

Weight of equity = \frac{30,000,000}{30,000,000 + 30,000,000}

                         = 50%

Since weight of equity is 50% and to maintain this capital structure, company should finance the 50% of funds

Amount financed by common equity = $20,000,000 * 50%

                                                             =  $10,000,000

7 0
3 years ago
Discuss 5 sources of government revenue in the economy ​
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The government may either sell goods or render services like train, city bus, electricity, transport, posts and telegraphs, water supply, etc. The government also earns revenue from the production of commodities like steel, oil, life-saving drugs, etc.
7 0
2 years ago
Search engines generate revenue through pay-per-click (each time a user clicks a link to a retailer’s website); pay-per-call (ea
Anettt [7]

Answer:

pay-per-click (each time a user clicks a link to a retailer’s website).

Explanation:

Pay-per-click is the cost stipulated by online survey platforms for each click on a sponsored ad.

Popularized by Google AdWords, this is one of the most used metrics for digital marketing, mainly because of the ease of having measurable digital advertising efforts.

The great advantages of this metric is the possibility of measuring and monitoring the number of users who will click on your link, making it more effective to analyze the impact that your business media has on people.

6 0
3 years ago
On his way home from work, Phil stopped at a shopping center. He parked in front of the dry cleaner, where he could pick up his
Anika [276]

Answer:

Neighbourhood centre

Explanation:

A neighbourhood centre is a place where local local residents have access to a wide range of services. People gather for group activities, social support, public information and so on.

Phil stopped at a shopping center. He parked in front of the dry cleaner, where he could pick up his suit. He did not have to move his car because next door was a gift shop where he could pick up a gift for his niece. Conveniently enough, next door to that store was a supermarket, where he purchased essentials like milk and cornflake cereal.

Phil is at a neighbourhood centre where wide variety of services are provided locally.

7 0
3 years ago
Read 2 more answers
For each of the following examples, identify whether a positive or negative externality is present and whether there will be too
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Answer:

A. Landscape lawns produce positive externality.

B. Sports vehicle generates a positive externality

C. Walk to work creates positive externality.

D. Cigarettes create a negative externality.

Explanation:

Positive externality occurs when society gets benefit from a persons act. Susan has created lawns near her house and there are beautiful flowers in the lawn. This will be relaxing for those who pass near by the lawns. There will be fresh air coming from the lawn and society will look pleasant.

Negative externality is one in which society is harmed by the act of a person. This happens when Anita smokes at a bus stop. There are other travelers who will be present at the bus stop might be harmed from the smoke which arises from the cigarette.

8 0
3 years ago
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