Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

5. A few months ago, Ford Motor Co. announced plans to invest $50 billion in electric vehicles. Assume that their forecasts of sales and costs

5. A few months ago, Ford Motor Co. announced plans to invest $50 billion in electric vehicles. Assume that their forecasts of sales and costs of the project suggest that they will earn $4.5 billion per year for the next 20 years. (Take FINA 365 to learn how to do this!) Ford currently has 3.95 billion shares of stock outstanding at a price of $14.50 each. The stock has a beta of 1.42. The firms total debt is $139,046 mm consisting of 100 mm bonds, each paying a semi-annual coupon at a rate of 7.7% and maturing in 26 years. You can assume a tax rate of 22%, a market risk premium of 6% and a risk-free rate of 3%. What is the NPV of Fords electric vehicle investment? (PLEASE SHOW WORK)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Finance And Control For Construction

Authors: Chris March

1st Edition

0415371155, 978-0415371155

More Books

Students also viewed these Finance questions

Question

1. If your script has a villain, are his motivations clear?

Answered: 1 week ago