Question
you are a consultant to a firm evaluating an expansion of its current business. The cash flow forecasts (in millions of dollar) for the project as follows:
Year cashflow
0 -100
1-10 15
0n the basis of the behavior of the firm's stock, you believe that the beta of the firm is 1.30. Assuming that the rate of return available on risk-free investments is 5% and that the expected rate of return on the market portfolio is 15% what is the net present value of the project
Answer:
NPV= -$32.58
Explanation:
The net present value of the investment is the cash inflow from the investment discounted at required rate of return. The required rate of return can be determined using the the formula below:
Ke= Rf +β(Rm-Rf)
Ke =? , Rf- 5%,, Rm-15%, β- 1.30
Ke=5% + 1.30× (15-5)= 18%
The NPV = Present value of cash inflow - initial cost
= A×(1-(1+r)^(-10)/r - initial cost
A- 15, r-18%
NPV = 15× (1-1.18^(-10)/0.18 - 100= -32.58
NPV = -$32.58
You will have a higher interest and will be in debt for longer
The inventory indicates that the cost of goods sold will be $25000.
<h3>How to calculate the cost of goods sold</h3>
It should be noted that the cost of goods sold ic calculated through the formula:
= Opening inventory + Purchases - Closing inventory
= $10000 + $20000 - $5000
= $25000
Therefore, the cost of goods sold is $25000.
Learn more about inventory on:
brainly.com/question/24868116
The standard quantity that is produces is multiplied to the standard price. The product is subtracted to the quantity variance and will be divided to the standard price. The product you have acquired will be the units that are produced.
4,500 pounds x $2.50 = 11,250
11,250 - $375 = 10,875
10,875 / $2.50 = 4,350
Answer: There are 4,350 units produced.
