WHAT IS THE NPV OF THE FOLLOWING PROJECT GIVEN THAT THE COST OF CAPITAL IS 7.5%
ID: 2724475 • Letter: W
Question
WHAT IS THE NPV OF THE FOLLOWING PROJECT GIVEN THAT THE COST OF CAPITAL IS 7.5%
Question 74 options:
$16,510 EXCEL/ $18,578 CALCULATOR
$25,213 EXCEL/ $28, 413 CALCULATOR
$19,915 EXCEL/$21,408 CALCULATOR
$12,423 EXCEL/ $14,388 CALCULATOR
WHAT IS THE DEGREE OF OPERATING LEVERAGE FOR CLYDES SURF SHOP?
5
3
2
4
hat is the after tax cost of a $1000 par value bond with a 8.5% annual coupon rate that is selling for $888 with flotation costs that will mature in 10 years when the company's tax rate is 35%
Question 76 options:
11.68%
12.5%
8.32%
7.59%
WHAT IS THE DEGREE OF FINANCIAL LEVERAGE FOR CLYDES SURF SHOP?
Question 77 options:
1.86
1.54
2.35
4.35
INITIAL OUTLAY $80,000 AFTER TAX CASH FLOW 1-3 $25,000 AFTER TAX CASH FLOW 4 $30,000 AFTER TAX CASH FLOW 5 $20,000Explanation / Answer
NPV would be the sum of present values of all cash flows:
year
Cash flow
PV factor 7.50%
PV
0
-80000
1.0000
-$80,000.00
1
25000
0.9302
$23,255.81
2
25000
0.8653
$21,633.32
3
25000
0.8050
$20,124.01
4
30000
0.7488
$22,464.02
5
20000
0.6966
$13,931.17
$21,408.33
NPV would be 21,408.33
year
Cash flow
PV factor 7.50%
PV
0
-80000
1.0000
-$80,000.00
1
25000
0.9302
$23,255.81
2
25000
0.8653
$21,633.32
3
25000
0.8050
$20,124.01
4
30000
0.7488
$22,464.02
5
20000
0.6966
$13,931.17
$21,408.33
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