Question
Teal Inc. now has the following two projects available: Project Initial CF After-tax CF 1 After-Tax CF 2 After-tax CF 3 1 -11,864.01 5,250 6,125
Teal Inc. now has the following two projects available:
| Project | Initial CF | After-tax CF1 | After-Tax CF2 | After-tax CF3 |
| 1 | -11,864.01 | 5,250 | 6,125 | 6,500 |
| 2 | -3,336.42 | 3,750 | 3,150 | |
Assume that RF = 5.0 percent, risk premium = 10.5 percent, and beta = 1.1. Use the EANPV approach to determine which project Teal Inc. should choose if they are mutually exclusive. (Round cost of capital and final answers to 2 decimal places, e.g.17.35% or 2,513.25.)
PMT1 = ?
PMT2 = ?
Step by Step Solution
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There are 3 Steps involved in it
Step: 1
Using the Expected NPV Approach we will first calculate the expected cash flows for each period and then discount them back to present value using the ...
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Introduction To Corporate Finance
Authors: Laurence Booth, Sean Cleary
3rd Edition
978-1118300763, 1118300769
