BUSI 620 MENTOR Learn Do Live /busi620mentor.com BUSI 620 MENTOR Learn Do Live /busi620mentor.com | Page 47

a) Which project(s) would the firm undertake if it used the
NPV investment criterion?
b) Is this the correct decision? Why?
Problem 10: The MacBurger Company, a chain of fast-food
restaurants, expects to earn $200 million after taxes for the
current year. The company has a policy of paying out half of
its net after-tax income to the holders of the company’s 100
million shares of common stock. A share of common stock of
the company current sells for eight times current earnings.
Management and outside analysts expect the growth rate of
earnings and dividends for the company to be 7.5 percent
per year. Calculate the cost of equity capital to this firm.
Spreadsheet Problem 1: The benefits and costs of an
investment project (the purchase of a piece of machinery)
are those given in the following table. In excel, calculate the
net revenue, or the revenue from the investment minus the
costs; the present value coefficient for every year, and the
present value of the net revenue. Add together column F to
get the net present value of the project. Should the firm
purchase the machine?
=============================================
BUSI 620 Week 8 Test 2 (100 % Score)
FOR MORE CLASSES VISIT