Question
Ramblin Wreck is a firm specializing in engineering components. The firm is publicly traded and is considering the following project: The project will last 5.00
Ramblin Wreck is a firm specializing in engineering components. The firm is publicly traded and is considering the following project:
The project will last 5.00 years with an annual cash flow of $40.00 million. The project will require an initial investment of $140.00 million
The firm must determine the cost of capital to evaluate the project. (The project is within the firms normal activities)
Ramblin Wreck, Inc. Financial Data:
| STOCK DATA: | BOND DATA: | ||
|---|---|---|---|
| Current Price Per Share | $29.00 | Current Price Per Bond | $926.00 |
| # of Shares | 2.00 million | # of bonds | 20,000.00 |
| Book Value | $50 million | Annual Coupon Rate | 8.00% |
| Face Value Per Bond | $1,000 | ||
| Maturity | 10 years |
The risk free rate in the economy is currently 2.00%, while investors have a market risk premium of 8.00%. Ramblin Wreck, Inc. has a beta of 1.50. The tax rate is 36.00%.
What is the NPV of the project? (express in millions, so 1000000 would be 1.00)
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
States And The Reemergence Of Global Finance
Authors: Eric Helleiner
1st Edition
0801428599, 978-0801428593
