1. You are evaluating a new project that costs $24.6 million over its 12-year life....
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You are evaluating a new project that costs $ million over its year life. Depreciation is straightline to zero over the life of the project and the salvage value is zero. The project is expected to have the following basecase estimates: Unit salesyear: Priceunit: $ VCunit: $ FCyear: $ Your firm has no debt and the firms WACC is and the corporate tax rate is If the projects estimates are only accurate to within what is the NPV for the project under the bestcase scenario? Your firm is considering taking on a project that will result in OCFs of $ per year, forever. Your firm has a debttoequity ratio. The yield to maturity on bonds is Corporate tax rate is The current stock price is $ The firm has paid dividends of $ $ and $ over the last years and the most recent dividend payment is $ Use the geometric average growth rate to estimate the cost of equity. Since this project is riskier than usual, management will apply an adjustment factor of to the cost of capital for this project. What is the maximum cost of the project for us to accept?
You are evaluating a new project that costs $ million over its year life. Depreciation is straightline to zero over the life of the project and the salvage value is zero. The project is expected to have the following basecase estimates:
Unit salesyear:
Priceunit: $
VCunit: $
FCyear: $
Your firm has no debt and the firms WACC is and the corporate tax rate is If the projects estimates are only accurate to within what is the NPV for the project under the bestcase scenario? Your firm is considering taking on a project that will result in OCFs of $ per year, forever. Your firm has a debttoequity ratio. The yield to maturity on bonds is Corporate tax rate is The current stock price is $ The firm has paid dividends of $ $ and $ over the last years and the most recent dividend payment is $ Use the geometric average growth rate to estimate the cost of equity. Since this project is riskier than usual, management will apply an adjustment factor of to the cost of capital for this project. What is the maximum cost of the project for us to accept?
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