You will use this information for NINE QUESTIONS. Esfandairi Enterprises is considering a new three-vear expansion project that requires an initial fixed asset investment of $22.78 million. This fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be worthless. The project is expected to sell one million units each year at a price per unit of $18.50 and a cost per unit of $6.40, however actual cost and price may be 10% higher or lower than these expected values. Fixed costs will be $4 million per year. The tax rate is 21 percent and the required return on the project is 12.4 percent. What is the NPV's sensitivity to price per unit? The NPV could be as low as -$1.41 million The NPV could be as low as - $8.40million The NPV could be as low as -$7.20million The NPV could be as low as -$5.99 million The NPV could be as low as -50.30million QUESTION 4 Suppose you buy some stock at the beginning of the year for $28 per share. At the end of the year, the price is $42 per share. During the year, you receive a $2.40 dividend per share. What is the DIFFERENCE between the dividend yield and the capital gains yield? 141% 58.57% 23.43% 41.43% 6.43% A company buys an asset for $10mm and depreciates it using the MACRS 5-year schedule below. If the asset is sold for after three years for $3.4mm and the tax rate is 21%, then what is the after-tax salvage value? Year 1 2 3 4 5 6 32 20 19.2 11.52 11.52 5.76 MACRS % $3,290,800 $4,382,800 $2,686,000 $4,181,200 $3,089,200 QUESTION 6 You own a stock portfolio invested 15 percent in Stock Q. 24 percent in Stock R. 30 percent in Stock S. and 31 percent in Stock T. The betas for these four stocks are 0.97 1.32, 1.43, and 1.63, respectively. What is the portfolio beta? 1.40 1.43 1.34 1.32 1.63 You will use this information for NINE QUESTIONS. Esfandairi Enterprises is considering a new three-vear expansion project that requires an initial fixed asset investment of $22.78 million. This fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be worthless. The project is expected to sell one million units each year at a price per unit of $18.50 and a cost per unit of $6.40. however actual cost and price may be 10% higher or lower than these expected values, Fixed costs will be $4 million per year. The tax rate is 21 percent and the required return on the project is 12.4 percent Under the base case (expected) scenario, what is the project's DOL? 0.50 01.00 1.50 1.25 0.75