Cvm Study Guide
Assignment Print View
http://ezto.mhecloud.mcgraw-hill.com/hm.tpx
1.
award:
0.50 points
The APV method to value a project should be used when the: project's level of debt is known over the life of the project. project's target debt to value ratio is constant over the life of the project. project's debt financing is unknown over the life of the project. Both A and B. Both B and C.
2.
award:
1.00 point
Calculate the Horizon Value in 2013 for XYZ Manufacturing Company if Free Cash Flows in 2013 are $678, WACC= 12.5%, and growth rate is 4%. Assume growth is expected to be constant after 2013. $12,245.67 $3,231.31 $8,295.53 $375.28 $19,231.45
3.
award:
1.00 point National Electric Company (NEC) is considering a $40 million project in its power systems division. Tom Edison, the company’s chief financial officer, has evaluated the project and determined that the project’s unlevered cash flows will be $2.6 million per year in perpetuity. Mr. Edison has devised two possibilities for raising the initial investment: Issuing 10-year bonds or issuing common stock. NEC’s pretax cost of debt is 7.2 percent, and its cost of equity is 11.4 percent. The company’s target debt-to-value ratio is 80 percent. The project has the same risk as NEC’s existing businesses, and it will support the same amount of debt. NEC is in the 34 percent tax bracket. Required: (a) Calculate net present value. (Do not include the dollar sign ($). Enter your answer in dollars, not millions of dollars (e.g., 1,234,567). Round your answer to 2 decimal places. (e.g., 32.16)) Net present value $
(b) Should NEC accept the project? (Click to select)
Worksheet
Difficulty: Basic
4.
award:
1.00 point
Baston Co. has never paid a dividend. Free Cash Flow is projected to be $80,000 and $100,000 for the next 2 years. After the second year, FCF is expected to grow at a constant rate of 8%. The company's WACC is 12%. What is Baston's Value of Operations? $15,786.98
http://ezto.mhecloud.mcgraw-hill.com/hm.tpx
1.
award:
0.50 points
The APV method to value a project should be used when the: project's level of debt is known over the life of the project. project's target debt to value ratio is constant over the life of the project. project's debt financing is unknown over the life of the project. Both A and B. Both B and C.
2.
award:
1.00 point
Calculate the Horizon Value in 2013 for XYZ Manufacturing Company if Free Cash Flows in 2013 are $678, WACC= 12.5%, and growth rate is 4%. Assume growth is expected to be constant after 2013. $12,245.67 $3,231.31 $8,295.53 $375.28 $19,231.45
3.
award:
1.00 point National Electric Company (NEC) is considering a $40 million project in its power systems division. Tom Edison, the company’s chief financial officer, has evaluated the project and determined that the project’s unlevered cash flows will be $2.6 million per year in perpetuity. Mr. Edison has devised two possibilities for raising the initial investment: Issuing 10-year bonds or issuing common stock. NEC’s pretax cost of debt is 7.2 percent, and its cost of equity is 11.4 percent. The company’s target debt-to-value ratio is 80 percent. The project has the same risk as NEC’s existing businesses, and it will support the same amount of debt. NEC is in the 34 percent tax bracket. Required: (a) Calculate net present value. (Do not include the dollar sign ($). Enter your answer in dollars, not millions of dollars (e.g., 1,234,567). Round your answer to 2 decimal places. (e.g., 32.16)) Net present value $
(b) Should NEC accept the project? (Click to select)
Worksheet
Difficulty: Basic
4.
award:
1.00 point
Baston Co. has never paid a dividend. Free Cash Flow is projected to be $80,000 and $100,000 for the next 2 years. After the second year, FCF is expected to grow at a constant rate of 8%. The company's WACC is 12%. What is Baston's Value of Operations? $15,786.98