Question
QUESTION 1 Anderson Systems is considering a project that has the following cash flow and WACC data. What is the project's NPV? Note that if
QUESTION 1
Anderson Systems is considering a project that has the following cash flow and WACC data. What is the project's NPV? Note that if a project's expected NPV is negative, it should be rejected.
WACC: | 9.00% | |||
Year | 0 | 1 | 2 | 3 |
Cash flows | -$1,000 | $500 | $500 | $500 |
$265.65 | ||
$278.93 | ||
$292.88 | ||
$307.52 | ||
$322.90 |
QUESTION 6
Gul Corp. considers the following capital structure optimal: 40% debt; 50% equity; and 10% preferred stock. Guls stock currently sells for $50 per share. Guls beta is 1.8. The risk-free rate is 9 percent and the expected market return is 13 percent. Guls bond currently sells in the market for $1150. The bond carries an annual coupon payment of 12 % of the face value which is paid in two semiannual payments. The bond will mature in 15 years and its face value is $1000. The bond's annual yield to maturiy is 10.04%. The firms marginal tax rate is 40 percent. The Guls required return on the preferred stock is 13%. Find the firms overall cost of capital (WACC).
1. | 13.416% | |
2. | 16.213% | |
3. | 8.109% | |
4. | 11.809% |
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