forwhat

the answer should be correct,

for question 14 specifically, the year one EBIT=24-0.5-19=4.5m, since the project was financed partially by debt, we need to crunch interest before calculating tax effect. Interest = Debt * r_d = weight of debt financing initial outlay * initial outlay * r_d = 0.4 * 38 * 0.12

therefore the accounting income after tax equals to (4.5 - 0.4*38*0.12)*(1 - 0.4)=1.6056

 

sorry I didn't get the market value of the project from this question, how to get it? and how do you get the answer 8.706M?

forwhat

what you need to finance with debt for the project is the real money (outlay) invested in that project, but not NPV + Outlay.

forwhat

QUOTE:

以下是引用hehanz在2010-5-25 10:10:00的发言：
forwhat,请看三楼的回复.

 

Wow, you are so impressive that you two can study this question in such detail! Nice!

 

I see what's going on with it. The two questions from notes and the sample are actually have different "assumptions".

Basically, financing a project are based on initial outlay which is the real money invested. The demonstration on notes, however, specifically mentions the way to calculate the interest expense. Therefore, when answering the sample question, we dont need to have the market value before getting the interest cost.