Homework: Principales of Finance
I: Carrefour is expecting its new center to generate the following cash flows:
|
Years
|
0
|
1
|
2
|
3
|
4
|
5
|
|
Initial
Investment
|
($35,000,000)
|
|
|
|
|
|
Net operating cash-flow
|
|
$6,000,000
|
$8,000,000
|
$16,000,000
|
$20,000,000
|
$30,000,000
|
i. Determine the payback for this new center.
ii. Determine the net present value using a cost of capital of 15 percent. Should the project be accepted?
II. What is the EAC of two projects: project A, which costs $150 and is expected to last two years, and project B, which costs $190 and is expected to last three years? The cost of capital is 12%.
III. A company pays annual dividends of $10.40 with no possibility of it changing in the next several years. If the firm's stock is currently selling at $80, what is the required rate of return?
IV. Stag corp has a capital structure which is based on 50% common stock, 20% preferred stock and 30% debt. The cost of common stock is 14%, the cost of preferred stock is 8% and the pre-tax cost of debt is 10%. The firm's tax rate is 40%.
i. Calculate the WACC of the firm.
ii. The firm is considering a project that is equally as risky as the firm's current operations. This project has initial costs of $280,000 and annual cash inflows of $66,000, $320,000, and $133,000 over the next three years, respectively. What is the net present value of this project ?
Format your assignment according to the following formatting requirements:
(1) The answer should be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides.
(2) The response also includes a cover page containing the title of the assignment, the student's name, the course title, and the date. The cover page is not included in the required page length.
(3) Also include a reference page. The Citations and references should follow APA format. The reference page is not included in the required page length.