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Ainat [17]
2 years ago
12

Wilson’s is reviewing a project with an internal rate of return of 13.09 percent and a beta of 1.42. The market risk premium is

8.1 percent, the tax rate is 35 percent, and the risk-free rate is 2.9 percent. The firm's WACC is 12.68 percent. Will the project be accepted if the WACC is used as the discount rate for the project? Should the project be accepted according to the CAPM, and why or why not?
Business
1 answer:
maria [59]2 years ago
5 0

Answer:

Accepted and rejected

Explanation:

Since the internal rate of return is 13.09% and the WACC is 12.68%

As we can see that the internal rate of return is higher than the WACC as WACC is considered as the discount rate

So the project should be accepted

And, if CAPM is used

So, the expected rate of return is

If CAPM is used

Risk-free rate of return + Beta × market risk premium

= 2.9% + 1.42 × 8.1%

= 2.9% + 11.502%

= 14.40%

And, The Internal rate of return  = 13.09%

Since the internal rate of return is less than the expected rate of return therefore the project should be rejected

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Any business that is in the tech business, where massive amounts of money go for development and for producton are companies that are very likely to need startup capital from some sort of investor; in this case it can be a venture capitalist but it can also be any other type of investor. 
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The current value in today's dollars of a future sum of money is called :______
AleksandrR [38]
Ans: (a) present value
4 0
2 years ago
Granting access to a user based upon how high up he is in an organization violates what basic security premise?
hodyreva [135]

Granting access to a user based upon how high up he is in an organization violates "the principle of least privileges."

As the principle of least privileges states that a person should be given only those privileges that are needed or are necessary to perform a specific job or task and nothing more.

The principle of least privileges states that you assign users the minimum set of privileges which they require to do their jobs, according to their roles.

The principle of least privilege prevents the spread of malware on your network. An administrator or superuser with access to a lot of other network resources and infrastructure could potentially end up spreading malware to all those other systems which he gets access to.

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3 0
1 year ago
Your firm is thinking about investing ​$200 comma 000200,000 in the overhaul of a manufacturing cell in a lean environment. Reve
Zepler [3.9K]

Answer:

EAW = -$17,545.71

Explanation:

initial investment = $200,000

cash inflows;

  • Year 1 = $33,000
  • Year 2 = $44,000
  • Year 3 = $55,000
  • Year 4 = $66,000
  • Year 5 = $77,000
  • Year 6 = $88,000
  • Year 7 = $99,000
  • Year 8 = $110,000
  • Year 9 = $132,000

cash outflows:

  • Year 1 = $20,000
  • Year 2 = $30,000
  • Year 3 = $40,000
  • Year 4 = $50,000
  • Year 5 = $60,000
  • Year 6 = $70,000
  • Year 7 = $80,000
  • Year 8 = $90,000
  • Year 9 = $100,000

EAW = equivalent annual worth = equivalent annual benefits - equivalent annual costs

to determine the EAB we must first find the PV of the cash inflows using a financial calculator = $408,348.84

EAB = (PV x r) / [1 - (1 + r)⁻ⁿ] = ($408,348.84 x 10%) / [1 - (1 + 10%)⁻⁹] = $70,905.91

to determine the EAC we must first find the PV of the cash outflows (including initial outlay) using a financial calculator = $509,395

EAC = (PV x r) / [1 - (1 + r)⁻ⁿ] = ($509,395 x 10%) / [1 - (1 + 10%)⁻⁹] = $88,451.62

EAW = $70,905.91 - $88,451.62 = -$17,545.71

5 0
3 years ago
Computech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends.
Arturiano [62]

Answer: $8.81

Explanation:

To solve this, add the present values of the dividends from years 3, 4 and 5 and then add the present value of the terminal value of the stock at year 5.

Year 3 dividend = $0.50

Year 4 dividend = 0.50 * (1 + 49%) = $0.745

Year 5 dividend = 0.745 * 1.49 = $1.11005

= Dividend in year 3 / (1 + required rate of return)³ + Dividend in year 4 / (1 + required rate of return)⁴ + Dividend in year 5 / (1 + required rate of return)⁵ +   (Dividend in year 5 * (1 + growth rate) / ( required rate of return - growth rate ) ) / (1 + required rate of return)⁵

= 0.5 / 1.16³ + 0.745/1.16⁴ + 1.11005/1.16⁵ + ( 1.11005 / (16% - 9%)) / 1.16⁵

= $8.81

5 0
2 years ago
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