答案和详解如下： 6.A company is considering a $10,000 project that will last 5 years.
Annual after tax cash flows are expected to be $3,000
Target debt/equity ratio is .4
Cost of equity is 12%
Cost of debt is 6%
Tax rate 34% What is the project's net present value (NPV)? A) +$1,460. B) -$1,460. C) $0. D) $+1,245 The correct answer was A) First, calculate the weights for debt and equity wd + we = 1 we = 1 - wd
wd / we = 0.40 wd = 0.40 * (1 - wd) wd = 0.40 - 0.40wd 1.40wd = 0.40 wd = 0.286, we = 0.714 Second, calculate WACC
WACC = (wd * kd)* (1 - t) + (we * ke) = (0.286 * 0.06 * 0.66) + (0.714 * 0.12) = 0.0113 + 0.0857 = 0.0970
Third, calculate the PV of the project cash flows
N = 5, PMT = -3,000, FV = 0, I/Y = 9.7, CPT PV = 11,460
And finally, calculate the project NPV by subtracting out the initial cash flow
NPV = $11,460 - $10,000 = $1,460
7.Which of the following statements about NPV and IRR is FALSE?
A) The NPV method assumes that all cash flows are reinvested at the cost of capital. B) For independent projects if the IRR is > the cost of capital accept the project. C) The IRR is the discount rate that causes the project's NPV to equal zero. D) For mutually exclusive projects you should use the IRR to rank and select projects. The correct answer was D) For mutually exclusive projects you should use NPV to rank and select projects.
8.Which of the following statements about the discounted payback period is FALSE? The discounted payback:
A) period is generally shorter than the regular payback. B) frequently ignores terminal values. C) method can give conflicting results with the NPV. D) period is the time it takes for the present value of the project cash inflows to equal the cost of the investment. The correct answer was A) The discounted payback period calculates the present value of the future cash flows. Because these present values will be less than the actual cash flows it will take a longer time period to recover the original investment amount.
9.As the director of capital budgeting for Denver Corporation, an analyst is evaluating two mutually exclusive projects with the following net cash flows:
Year | Project X | Project Z | 0 | -$100,000 | -$100,000 | 1 | $50,000 | $10,000 | 2 | $40,000 | $30,000 | 3 | $30,000 | $40,000 | 4 | $10,000 | $60,000 |
If Denver's cost of capital is 15 percent, which project should be chosen? A) Project X, since it has the higher IRR. B) Neither project. C) Project X, since it has the higher net present value (NPV). D) Project Z, since it has the higher IRR. The correct answer was B) NPV for Project X = -100,000 + 50,000 / (1.15)1 + 40,000 / (1.15)2 +
30,000 / (1.15)3 +10,000 / (1.15)4 = -100,000 + 43,478 + 30,246 + 19,725 + 5,718 = -833 NPV for Project Z = -100,000 + 10,000 / (1.15)1 + 30,000 / (1.15)2 +
40,000 / (1.15)3 +60,000 / (1.15)4 = -100,000 + 8,696 + 22,684 + 26,301 + 34,305 = -8,014 Reject both projects because neither has a positive NPV.
10.Tapley Acquisition, Inc., is considering the purchase of Tangent Company. The acquisition would require an initial investment of $190,000, but Tapley's after-tax net cash flows would increase by $30,000 per year and remain at this new level forever. Assume a cost of capital of 15 percent. Should Tapley buy Tangent?
A) No, because k > IRR. B) Yes, because the NPV = $10,000. C) Yes, because the NPV = $30,000. D) Yes, because the IRR < the cost of capital. The correct answer was B) This is a perpetuity. PV = PMT / I = 30,000 / 0.15 = 200,000 200,000 - 190,000 = 10,000
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发表于 2008-4-4 15:26
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