Answered step by step
Verified Expert Solution
Question
1 Approved Answer
PART A. Waxo coastloands company is considering the purchase of land and the construction of a new plant. the land, which would be bought immediately
PART A.
Waxo coastloands company is considering the purchase of land and the construction of a new plant. the land, which would be bought immediately (at t=0), has a cost of $100,000 and the building, which would be erected at the end of the first year (t=1) , would cost $200,000. From year 2 through 5, it is estimated that the firm's cash flow will be $125,000 each year. what is the projects discounted payback period if it requires a 14% return on the project?
A. 3.42 years
B. 3.80 years
C. 4.15 years
D. 4.32 years
PART B.
Waxk is also considering a project that has initial investment of $1,920. it produces cash inflow of $450 at the end of the first year. this cash flow grows at 12% for years 2 through 5. what is the projects NPV if the company is expecting its WACC to be 10%?
A. $220.45
B. $113.45
C. Answer is meaningless since WACC is less than the growth rate of cash flows.
D. $183.93
E. $201.20
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