DeBlassio Associates is considering a project that has the following cash flow data. What is the project's payback?

Year 012345

Cash flows-$2,300$500$520$540$560$580

Petmart recently hired Jim as a consultant to estimate the companys WACC. Jim has obtained the following information. (1) The firm's noncallable bonds mature in 20 years, have an 8.00% annual coupon, a par value of $1,000, and a market price of $1,050.00. (2) The companys tax rate is 40%.(3) The risk-free rate is 4.50%, the market risk premium is 5.50%, and the stocks beta is 1.80.(4) The target capital structure consists of 45% debt and the balance is common equity.The firm uses CAPM to estimate the cost of common stock, and it does not expect to issue any new shares. What is its WACC?

Ohman Inc. is considering Projects S and L, whose cash flows are shown below. These projects are mutually exclusive, equally risky, and not repeatable. If the decision is made by choosing the project with the shorter payback, some value may be forgone. How much value will be lost in this instance? Note that under some conditions choosing projects on the basis of the shorter payback will not cause value to be lost.

WACC:10.25%

Year 01234

CF_S-$760$400$1,100$0$0

CF_L-$2,300$600$1,000$1,100$1,200

Jake is searching for a project for his company to invest in. He is interested in VR Headsets, Inc. He has been impressed with the product and believes VR Headsets is an innovative product. However, Jake realizes that any time you consider a project, risk is a major concern. The rule he follows is to only invest in projects with a coefficient of variation of returns below 0.90. Jake has obtained the following NPV information and associated probabilities for VR Headset, Inc. Calculate (1) the expectedNPV (2) the standard deviation ofNPV and (3) the coefficient variation. (4) Finally, should Jake invest in VR?

ScenarioProbabilityNPV

Best Case40%$40,000

Base Case20%$11,000

Worst Case40%-$8500