A young software development company recently went public. To attract investors, the company executives want to emphasize the am
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The value of Net present value is $12,895.45.
Given that
initial investment = $50,000
1st-year cash flow = $15,000
2nd-year cash flow =$ 25,000
3rd-year cash flow =$ 30,000
4th-year cash flow = $20,000
5th-year cash flow = $15,000
rate = 20%
using formula
- The current value of a future stream of payments from a business, project, or investment is determined using net present value, or NPV.
- You must predict the timing and size of future cash flows in order to determine NPV, and you must choose a discount rate that is equal to the least allowable rate of return.
- Your cost of capital or the rewards offered by substitute investments with comparable risk may be reflected in the discount rate.
- Positive NPV indicates that the rate of return on a project or investment will be higher than the discount rate.
- to learn more about Net present value with the given link
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Answer: Jack Corp's D/E ratio is 0.67.
We follow these steps to arrive at the answer:
We begin with the DuPont Identity for Return on Equity (RoE)
Substituting the values from the question in the DuPont identity we get,
So,
Substituting the value of equity multiplier in the formula above we get,
Now,
So,
Now that we have the proportions of debt and equity to total assets, we can find the Debt Equity (D/E) ratio as follows:
Substituting the values we get,