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Sidana [21]
3 years ago
11

Assume that you are a new analyst hired to evaluate the capital budgeting projects of the company which is considering investing

in two CPEC projects, “Expansion Zone North” and “Expansion Zone East”. The initial cost of each project is Rs. 10,000. Company discount all projects based on WACC. Further, all the projects are equally risky projects and the company uses only debt and common equity for financing these projects. It can borrow unlimited amounts at an interest rate of rd 10% as long as it finances at its target capital structure, which calls for 50% debt and 50% common equity. The dividend for next period is $2.0, its expected that they will grow at the constant growth rate of 8%, and the company’s common stock sells for $20. The tax rate is 50%. The cash flows of both the projects are given in table below: Time Expansion Zone North Cashflows (amount in Rs.) Expansion Zone East Cashflows (amount in Rs.) 0 - 10,000 - 10,000 1 6,500 3,500 2 3,000 3,500 3 3,000 3,500 4 1,000 3,500 Carefully analyze the above table and answer the following questions in detail. I. Calculate the weighted average cost of capital for this firm? (2.5 marks) II. Compute each project’s IRR, NPV, payback, MIRR, and discounted payback. (2.5 Marks) III. Which project(s) should be accepted if they are mutually exclusive? Explain (1.5 Marks) IV. Which project(s) should be accepted if they are independent? Explain (1.5 Marks)
Business
2 answers:
Alchen [17]3 years ago
6 0

Answer:

Assume that you are a new analyst hired to evaluate the capital budgeting projects of the company which is considering investing in two CPEC projects, “Expansion Zone North” and “Expansion Zone East”. The initial cost of each project is Rs. 10,000. Company discount all projects based on WACC. Further, all the projects are equally risky projects and the company uses only debt and common equity for financing these projects. It can borrow unlimited amounts at an interest rate of rd 10% as long as it finances at its target capital structure, which calls for 50% debt and 50% common equity. The dividend for next period is $2.0, its expected that they will grow at the constant growth rate of 8%, and the company’s common stock sells for $20. The tax rate is 50%.

Alenkasestr [34]3 years ago
4 0

Answer:

Explanation:

Assume that you are a new analyst hired to evaluate the capital budgeting projects of the company which is considering investing in two CPEC projects, “Expansion Zone North” and “Expansion Zone East”. The initial cost of each project is Rs. 10,000. Company discount all projects based on WACC. Further, all the projects are equally risky projects and the company uses only debt and common equity for financing these projects. It can borrow unlimited amounts at an interest rate of rd 10% as long as it finances at its target capital structure, which calls for 50% debt and 50% common equity. The dividend for next period is $2.0, its expected that they will grow at the constant growth rate of 8%, and the company’s common stock sells for $20. The tax rate is 50%. The cash flows of both the projects are given in table below: Time Expansion Zone North Cashflows (amount in Rs.) Expansion Zone East Cashflows (amount in Rs.) 0 - 10,000 - 10,000 1 6,500 3,500 2 3,000 3,500 3 3,000 3,500 4 1,000 3,500 Carefully analyze the above table and answer the following questions in detail. I. Calculate the weighted average cost of capital for this firm? (2.5 marks) II. Compute each project’s IRR, NPV, payback, MIRR, and discounted payback. (2.5 Marks) III. Which project(s) should be accepted if they are mutually exclusive? Explain (1.5 Marks) IV. Which project(s) should be accepted if they are independent? Explain (1.5 Marks)

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Raven Company has a target of earning $71,200 pre-tax income. The contribution margin ratio is 16%. What amount of dollar sales
Jlenok [28]

Answer:

$685,000  

Explanation:

First and foremost, the formula for determining the contribution margin ratio can be used to determine the target dollars sales as shown below:

contribution margin ratio=contibution margin/sales revenue

contribution margin ratio=16%

contribution margin required=pretax income+fixed costs

contribution margin required=$71,200+$38,400=$109,600  

16%=$109,600/sales revenue

16%*sales revenue=$109,600

sales revenue=$109,600/16%

sales revenue=$685,000  

6 0
2 years ago
The additional dining space will occupy space next to Olaf’s that was recently rented to a tenant. By claiming the space for the
Illusion [34]

Answer:

$12,146

Explanation:

The computation of present value of this opportunity cost is shown below:-

Net After tax Operating Profit Per month = Rent space per month × Profit margin on the renting the space percentage

= $1,000 × 30%

= $300

Project is for 4 Years

Total months = 4 × 12

= 48 Months

Interest Rate Per month = 9% ÷ 12

= 0.75%

As per the question the Rent is Received at the start of the month

So Present Value of this opportunity cost = $300 (1 + PVAF (0.75%,47))

= $300 × ( 1 + 39.486)

= $12,145.85

= $12,146

3 0
3 years ago
J. S. Bach's organ chorale prelude "Jesu, Joy of Man's Desiring" is an example of ______ texture.
drek231 [11]
The answer is "polyphonic" 

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3 0
3 years ago
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A firm conducted a market analysis and determined that a new wo
forsale [732]
The answer is A the firm should increase output!!!!
4 0
3 years ago
On October 1, 2022, Ivanhoe Company places a new asset into service. The cost of the asset is $87500 with an estimated 5-year li
Dimas [21]

Answer:

$3150

Explanation:

Given:

Cost of the asset purchased = $87500 (on 1st October. 2022)

Salvage value at the end of its useful life = $24500

Useful life estimated = 5 years

Question asked:

What is the depreciation expense for 2022 if Ivanhoe Company uses the straight-line method of depreciation?

Solution:

<u>As we know:</u>

Straight-Line\ Depreciation\ Expense=\frac{Cost\ - Salvage\ Value}{Useful\ Life\ of\ the\ Asset}

                                                               =\frac{87500-24500}{5} =\frac{63000}{5} =12600

Depreciation expenses per year = $12600

But we have to find depreciation expenses for 2022 for:-

From 1st October, 2022 to 31st December, 2022 = 3 months.

<em><u>Straight-Line Depreciation Expense for Partial Year = </u></em>

<em><u /></em>D\times\frac{N}{12} \\\\ D=Depreciation\ expense\ for\ a\ complete\ year.\\N= Number\ of\ months\ during\ which\ the\ fixed\ asset\ was\ available\ for\ use

Depreciation Expense for 3 months = 12600\times\frac{3}{12} =\frac{37800}{12} =3150

Therefore, the depreciation expense for 2022 if Ivanhoe Company uses the straight-line method of depreciation is $3150.

                                                             

5 0
3 years ago
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