Question
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
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started