q1&q2

Mr. Mandeville is considering new project which costs $600,000 initially and will give one-time cashflow of $900,000 two years from today. That project beat is 1, and return on market portfolio is 25%, and interest rate is 10%. Corporate tax-rate is 50%. And interest payments are tax deductible like mortgage tax deductibility. (a) What is the rate of return for this project? (CAPM) (b) What is the NPV of this project if it is fully equity financed? Is the Good or Bad project? (c) What is the NPV of this project, if he can borrow all $600,000 at 10%? (Use PV of tax shield: Remember you will get tax benefits every-year for two years) Ms. Mandeville is considering to buy a house. Following is the information about Income Tax rate and Mortgage rates. She wants to buy $251, 424 priced house. She needs $36,000 per year for basic living and is willing to spend remaining portion for mortgages. What is the minimum annual income to earn to afford this 30 year mortgages