Question
Apollo Inc has undertaken a project with the following data projected for the next year. Sales $120,000 Costs (excluding depreciation) $36,000 Depreciation $5,000 Interest $2,000
Apollo Inc has undertaken a project with the following data projected for the next year.
Sales | $120,000 |
Costs (excluding depreciation) | $36,000 |
Depreciation | $5,000 |
Interest | $2,000 |
Capital Expenditures | $50,000 |
Change in net working capital | $2,000 |
Marginal tax rate | 25% |
What is the unlevered net income (UNI) of the project?
Group of answer choices
$50,000
$63,000
$79,000
$59,250
What is the free cash flow generated by the project?
Group of answer choices
$22,000
$12,250
$55,000
-$33,000
Apollo issues stock (i.e., equity) to pay for 60% of the project. Apollo's required return on equity is 12%. The rest of the financing is in the form of a loan with a 6% interest rate. What is Apollo's weighted average cost of capital?
Group of answer choices
9%
10.26%
6%
9.6%
If the free cash flows of the project are expected to grow at 2% in perpetuity, what is the value of Apollo's project?
(Remember the data provided for Apollo are next year's forecasts)
Group of answer choices
$178,500
$11,238
$136,111
$175,000
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