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Gnom [1K]
3 years ago
13

A firm is considering a project that will generate perpetual cash flows of $50,000 per year beginning next year. The project has

the same risk as the firm's overall operations. If the firm's WACC is 12%, and its debt-to-equity ratio is 1.33, what is the most it could pay for the project and still earn its required rate of return
Business
1 answer:
Vesna [10]3 years ago
5 0

Answer:

Present value = $416666.6667 rounded off to $416666.67

Explanation:

To calculate the most the firm could pay for the project, we will need to calculate the present value of the project when discounted at the WACC for the project, which is equal to the WACC for the firm in this case. The cashflows from the project will be perpetual, thus we will use the formula for the present value of perpetuity.

Present value of perpetuity = Cash flow / r

Where,

r is the rate of discount or discount factor which in this case is WACC

Present value = 50000 / 0.12

Present value = $416666.6667 rounded off to $416666.67

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Answer: official reserves

Explanation:

The official reserve account is simply part of capital account which has to do with securities and foreign currency that are being held by the central bank of a particular country and which are used to balance payments yearly.

It should be noted that when there's trade surplus, there'll be increase in reserves and when there is a deficit in trade, there'll be decrease in reserves.

4 0
3 years ago
The 6.3 percent, semi-annual coupon bonds of PE Engineers mature in 13 years and have a price of $992. These bonds have a curren
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Answer:

6.35, 6.39 and 6.49

Explanation:

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7 0
3 years ago
Read 2 more answers
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Answer:

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3 years ago
The following transactions took place for Tanaka company in June: Purchased equipment on account for $9,800. Billed customers $5
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