Question Details

[answered] May I get answers for these Q?


May I get answers for these Q??

An asset depreciated in the 5-year MACRS class is fully depreciated at the end of 5 years.

  1. Suppose the NPV of a project's inflows is positive at a discount rate of 10%. From this we know that the IRR of this project is greater than 10%. (Assume that project has an immediate cash outflow and all future cash flows are positive).

If we sell an asset for $10,000 and our tax rate is 30%, the resulting after-tax cash flow is $7,000.

  1. If project A has a higher IRR than project B, then project A has to have a higher NPV than project B.
  2. If we sell an asset, the after-tax cash flow cannot be larger than the pre-tax cash flow.
  • Bond prices move primarily because of changes in default risk.
  1. In the WACC, we use the book value of debt and equity to determine the appropriate weights on the sources of capital.
  2. The Altman Z-score is commonly used to estimate a firm's stock price.
  • Most US corporate bonds are investment grade.

Shareholders will react negatively to the announcement of a non-convertible preferred stock issue because this issue will dilute their equity position.

  1. Suppose that the end of our road building project our earthmover has no market value. It would thus have no impact on the project's incremental cash flows. Assume that a firm has a WACC of 15%. It is considering a project of typical risk that requires an investment of? $1 million today and generates annual profits of $250,000 for five years; the first flow beginning in exactly one year. (There are no other relevant cash flows.) Since this is a profitable project, it will increase the value of the firm.

Consider the following mutually exclusive projects. Each cash flow occurs at the end of each year. The discount rate is .05.


Year

A

B

C

D

0

-1000

-1000

-1000

-1000

1

500

365

470

2

500

365

470

3

365

470

4

1550

365

  • Which project has the best payback period?
  • Which project has the best discounted payback period?
  • Which project has the best accounting rate of return?
  • Which project has the best NPV?
  • Which project has the best IRR?


The following 4 questions refer to the following project (all cash flows occur at the end of the period). The WACC = .1.


Year

Cash flow after taxes

0

-100

1

41

2

41

??????3

??????????????41

Is this an acceptable project using the NPV rule?



Is this an acceptable project using the IRR rule?


What annual future cash flow would make the NPV exactly zero (assume as before that the future cash flows are an annuity)?


If the project's positive cash flows were all delayed by one year, by how much would the NPV decrease?



Alvarez Inc. is considering investing $1,000,000 in a new tequila distilling machine. It is depreciated in the 3-year ACRS class. It will increase the firm's incremental profit by $400,000 per year before taxes and depreciation. It will require the commitment of $100,000 in net working capital (consider this to be an opportunity cost) for the life of the project. The machine's estimated terminal value is $200,000 at the end of its four-year economic life. The firm's tax rate is 30%..


Assume we are evaluating 2 Canadian firms of comparable size in the igloo building industry. Both have a 30% tax rate. Firm A has zero debt, a beta of 1.2 and Firm B has a beta of 1.5. Estimate Firm B's debt-to-equity ratio.






On the diagram above, which of the securities A or B is superior using Sharpe's ratio as the measure of performance?


 


Solution details:
STATUS
Answered
QUALITY
Approved
ANSWER RATING

This question was answered on: Sep 18, 2020

PRICE: $15

Solution~0001013708.zip (25.37 KB)

Buy this answer for only: $15

This attachment is locked

We have a ready expert answer for this paper which you can use for in-depth understanding, research editing or paraphrasing. You can buy it or order for a fresh, original and plagiarism-free copy from our tutoring website www.aceyourhomework.com (Deadline assured. Flexible pricing. TurnItIn Report provided)

Pay using PayPal (No PayPal account Required) or your credit card . All your purchases are securely protected by .
SiteLock

About this Question

STATUS

Answered

QUALITY

Approved

DATE ANSWERED

Sep 18, 2020

EXPERT

Tutor

ANSWER RATING

GET INSTANT HELP/h4>

We have top-notch tutors who can do your essay/homework for you at a reasonable cost and then you can simply use that essay as a template to build your own arguments.

You can also use these solutions:

  • As a reference for in-depth understanding of the subject.
  • As a source of ideas / reasoning for your own research (if properly referenced)
  • For editing and paraphrasing (check your institution's definition of plagiarism and recommended paraphrase).
This we believe is a better way of understanding a problem and makes use of the efficiency of time of the student.

NEW ASSIGNMENT HELP?

Order New Solution. Quick Turnaround

Click on the button below in order to Order for a New, Original and High-Quality Essay Solutions. New orders are original solutions and precise to your writing instruction requirements. Place a New Order using the button below.

WE GUARANTEE, THAT YOUR PAPER WILL BE WRITTEN FROM SCRATCH AND WITHIN YOUR SET DEADLINE.

Order Now