From a financial manager’s perspective, discuss the capital-budgeting process used to identify projects that add to the firm’s value? How do capital-budgeting decisions help to define a firm’s strategic direction?
Discussion 2
WRITE THIS ESSAY FOR ME
Tell us about your assignment and we will find the best writer for your paper.
Get Help Now!When two mutually exclusive projects are being compared, explain why the short-term project might be higher ranked under the NPV criterion if the cost of capital is high; whereas, the long-term project might be deemed better if the cost of capital is low. Would changes in the cost of capital ever cause a change in the IRR ranking of two such projects? Explain.
Assignment -Unit 5
Problem (9-10)The earnings, dividends, and stock price of Shelby Inc. are expected to grow at 7% per year in the future. Shelby’s common stock sells for$23 per share, its last dividend was $2.00, and the company will pay a dividend of$2.14 at the end of the current year.
a. a. Using the discounted cash flow approach, what is its cost of equity?
b. If the firm’s beta is 1.6, the risk-free rate is 9%, and the expected return on the market is 13%, then what would be the firm’s cost of equity based on the CAPM approach?
c. c. If the firm’s bonds earn a return of 12 %, then what would be your estimate of rs using the over-own-bond-yield-plus-judgmental-risk-premium approach? (Hint: Use the midpoint of the risk premium range.)
d. On the basis of the results of parts a through c, what would be your estimate of Shelby’s cost of equity?
Problem (10-1) a project has an initial cost of $40,000 expected net cash inflows of $90,00 per year for 7 years, and a cost of capital of 11%. What is the project’s NPV? (hint: Begin by constructing a time line).
(10-2) Refer to problem 10-1. What is the project’s IRR?
(10-3) Refer to problem 10-1. What is the project’s MIRR?
(10-4) Refer to problem 10-1. What is the project’s PI?
(10-5) Refer to problem 10-1. What is the project’s payback period?
(10-6) Refer to problem 10-1. What is the project’s discounted payback period?
Discount Payback(DPB)
(10-7) Your division is considering two investment projects, each of which requires an up-front expenditure of $15 million. You estimate that the investments will produce the following net cash flows:
Year….Project A…………. Project B
1……… $5,000,000……….. $20,000,000
2……… $10,000,000……… $10,000,000
3……… $20,000,000……… $6,000,000
a. What are the two projects’ net present values, assuming the cost of capital is 5%, 10%, and 15%?
b. what are the two projects’ IRR at these same costs of capital?
Introducing our Online Essay Writing Services Agency, where you can confidently place orders for a wide range of academic assignments. Our reputable homework writing company specializes in crafting essays, term papers, research papers, capstone projects, movie reviews, presentations, annotated bibliographies, reaction papers, research proposals, discussions, and various other assignments. Rest assured, our content is guaranteed to be 100% original, as every piece is meticulously written from scratch. Say goodbye to concerns about plagiarism and trust us to deliver authentic and high-quality work.
WRITE MY ESSAY NOW
