1.

Pinder Ltd wants to enter the electric car business. To enter the business, Pinder Ltd will need to make an initial investment of $100 million into purchases of production facilities and equipment. The production facilities and equipment are expected to have a ten-year life and will be depreciated on a straight-line basis over that period, so that the book value of the production facilities and equipment equals zero at the end of year ten. Pinder Ltd plans to operate the business only for six years, after which Pinder Ltd plans to sell its production facilities and equipment for $55 million. For the six years that Pinder Ltd expects to operate in the electric car business, Pinder Ltd expects to generate cash revenues of $130 million in the first year, which Pinder Ltd expects to grow at a rate of 6% each year after the first year. The cash operating costs of running the electric car business, excluding depreciation expenses, are expected to be 25% of revenues. Pinder Ltd expects an increase in the net working capital of $20 million in year zero and a decrease in the net working capital of $20 million in year six when the business is sold. The corporate income tax rate is 40% and the discount rate is 10%. What is the NPV of the investment, based on the information above? (Round to the nearest two digits)

Group of answer choices

$213.64 million

None of the other answers are correct.

$224.26 million

$218.23 million

$227.82 million

2.

Pinder Co has 20,000 bonds outstanding, each with a face value of $1,000. 13,000 of the 20,000 bonds pay a semi-annual coupon of 6% p.a. with 10 years left to maturity and an effective annual yield to maturity of 7%. 7,000 of the 20,000 bonds pay an annual coupon of 9% p.a. with 12 years left to maturity and an effective annual yield to maturity of 8%. The most recent coupon for both types of bonds have just been paid. Pinder Cos effective tax rate is 35%. Pinder Co has 10 million ordinary shares outstanding which are currently trading at $4 per share. Pinder Cos beta is 1.5, the risk-free rate is 5%, and the expected return on the market portfolio is 15%. Using the capital asset pricing model to estimate the cost of equity, what is Pinder Cos after-tax weighted average cost of capital? (Round to the nearest two digits)

Group of answer choices

14.50%

14.98%

13.08%

15.63%

None of the other answers are correct.

3.

Pinder Co has 15 million shares outstanding with a current market price of $2 per share. Pinder Co announces an investment in a project where the initial investment in year 0 is $5 million and the cash inflow for the next five years will be $3 million, after which the investment will generate no cash flows. Pinder Cos discount rate for this project is 8%. What is the dollar increase in Pinder Cos share price due to the undertaking this investment? (Round to the nearest two digits)

Group of answer choices

None of the other answers are correct.

$0.55

$0.36

$0.28

$0.47