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Please see attachment for questions. There are a total of 10. 1. ABC Inc. is considering a project that has the following cash flow and
Please see attachment for questions. There are a total of 10.
1. ABC Inc. is considering a project that has the following cash flow and WACC data. (1) What is the project's NPV? Note that if a project's expected NPV is negative, it should be rejected. (2) What is the project's IRR? Note that if a project's WACC > IRR, it should be rejected. WACC:6% Year Cash flows 0 -$2,000 1 $500 2 $500 3 $500 4 $300 5 $300 2. ABC Enterprises is considering a project that has the following cash flow and WACC data. (1) What is the project's NPV? Note that a project's expected NPV can be negative, in which case it will be rejected. (2) What is the project's IRR? Note that if a project's WACC > IRR, it should be rejected. WACC: 10.00% Year 0 Cash flows -$1,050 1 $450 2 $460 3 $470 3. Warranty Inc. is considering a project that has the following cash flow and WACC data. (1) What is the project's NPV? Note that a project's expected NPV can be negative, in which case it will be rejected. (2) What is the project's IRR? Note that if a project's WACC > IRR, it should be rejected. WACC:10.00% Year Cash flows 0 -$950 1 $500 2 $400 3 $300 4. data. Berry Company is considering a project that has the following cash flow and WACC (1) What is the project's Payback Period? (2) What is the project's Discounted Payback Period? WACC:8.00% Year Cash flows 0 -$1,000 1 $400 2 $390 3 $380 4 $370 5 $360 5. Data Computer Systems is considering a project that has the following cash flow data. (1) What is the project's Payback Period? (2) What is the project's Discounted Payback Period? WACC:8.00% Year Cash flows 0 -$1,100 1 $450 2 $480 3 $500 6. XYZ Inc. is considering a capital budgeting project that has an expected return of 20% and a standard deviation of 15%. What is the project's coefficient of variation? 7. ABC Inc.'s stock has a 30% chance of producing a 20% return, a 40% chance of producing a10% return, and a 30% chance of producing a -10% return. (1) What is the firm's expected rate of return? (2) What is the firm's standard deviation? (3) What is the firm's coefficient of variation? 8. An Investor has $100,000 invested in a 2-stock portfolio. $30,000 is invested in Stock X and the remainder is invested in Stock Y. X's beta is 1.35 and Y's beta is0.80. What is the portfolio's beta? 9. Chance Inc's stock has an expected return of 12.25%, a beta of 1.5, and is in equilibrium. Assuming the risk-free rate is 4.00%. (1) What is the market risk premium? (2) What is the equity risk premium? 10. Calculate for Best Inc., assuming that (1) investors expect a 2.5% rate of inflation in the future, (2) the real risk-free rate is 1.5%, (3) the market risk premium is 3.0%, (4) the firm has a beta of 1.50, and (5) its realized rate of return has averaged 10.0% over the last 5 years. (1) What is the equity risk premium? (2) What is the required rate of returnStep by Step Solution
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