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please help with the following questions....see attachment 9. XYZ Company is considering two investments, both of which cost $40,000. The firm's cost of capital is
please help with the following questions....see attachment
9. XYZ Company is considering two investments, both of which cost $40,000. The firm's cost of capital is 15 percent. The cash flows are as follows: Year Project A Project B ($) ($) 1 30,000 25,000 2 8,000 15,000 3 10,000 15,000 4 10,000 8,000 a) What is the payback period for each project? Which project would you accept based on the payback period? (b) What is the discounted payback for each project? Which project would you accept based on the discounted payback criterion? (c) Calculate the NPV of each project? Which project would you choose based on the NPV criterion? (d) Based on the IRR criteria which project would you choose if they were mutually exclusive? Show all workings. 10. The following balance sheet extract relates to the ABC Company. Bonds Payable $1,600,000 Common Stock $5,000,000 Preferred Shares $2,550,000 Additional Information: i. The bonds are 8%, annual coupon bonds, with 9 years to maturity and are currently selling for 95% of par. ii. The company's common shares which have a book value of $25 per share are currently selling at $28 per share. The beta on the company's stock is 0.7 iii. Preferred shares have a book value of $100 per share. These shares are currently selling at $120 per share and carries a coupon rate of 6%. iv. Market Risk premium is 7 % and 3% is the risk-free rate. v. Company's Tax rate is 30%Step by Step Solution
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