MFI Inc. is a consultancy company that is located in Lebanon. One investor has consulted MFI and asked for an evaluation of two new proposed projects in Lebanon. The first project is repair & maintenance center (Project 1) This project will cost $120,000 and will generate $33,000 cash flow per year for the next six years. The other project (Project 2) is a beauty center. The initial costs of this project is estimated to be $75,000 and it may generate $22,000 for the next six years. The company estimates that the WACC is 10% 8. Which of the following statements about ONLY the project T is Most accurate? A) The MIRR of the project is 13.3%; The company should accept the new project. B) The NPV of the project 1 is approximately $23,723.6; The company should accept the new project 1 C) The discounted payback period is 4.7years. D) All of the above E) None of the above 9. If the projects (1& 2) are independent, the company would mostly advise:* A) Choose Project T since it has higher NPV than Project "2" B) Choose Project *2* since it has higher MIRR than Project 1 C) Accept both projects, since both are profitable projects D) None of the above. Trust S.A. is an Italian Telecom corporation that wants to expand its business internationally. It will open a new branch either in Germany or in France. Regardless of where it will be opened, the new branch will require a capital of 1,500,000 Bank of Madrid has agreed to loan Trust S.A. 600,000 at 8% before tax interest rate. Knowing that taxes are paid at 40% each year. . Moreover, Trust S.A. expects that it could raise 450,000 by issuing new preferred shares at a price of 50 per share, and the annual report showed that preferred stocks pays an annual dividend of 2.5. Trust S.A. provides the remaining required capital from retained earnings. Common stock that is currently selling at 60 per share and current dividend of 3.25, which would increase by an annual constant growth rate of 5% 7. Based on the information provided, Trust S.A's weighted average cost of capital is closest to: OA) 5% O B) 4.8% C) 6.6% D) 10.6% E) None of the above Page 4 of 12 Back Next Problem One SONY Company's current stock price is$36.00, its last dividend was $2.40, and its required rate of return is 12%. The company's dividends are expected to grow at a constant rate, g, in the future and cost of equity (rs) is expected to remain at 12%. 6. What is SONY's expected stock price 7 years from now? * A) $45.95 B) $46.95 C) $47.95 D) $48.24 E) None of the above. Page 3 of 12 Back Next