a . Using a discount rate of 9 % for this project and the NPV model , determine whether the company should accept or reject this project .
b . Should the company accept or reject it using a discount rate of 14 %?
c . Should the company accept or reject it using a discount rate of 21 %?
P16-5 ( similar to )
Break-even EBIT ( with and without taxes ). Alpha Company is looking at two different capital structures , one an all-equity firm and the other a levered firm with $ 4.8 million of debt financing at 7 % interest . The all-equity firm will have a value of $ 8 million and 400,000 shares outstanding . The levered firm will have 160,000 160,000 shares outstanding .
a . Find the break-even EBIT for Alpha Company using EPS if there are no corporate taxes .
b . Find the break-even EBIT for Alpha Company using EPS if the corporate tax rate is 15 %.
c . What do you notice about these two break-even EBITs for Alpha Company ?
P7-1 ( similar to )
Anderson Motors , Inc . has just set the company dividend policy at $ 0.85 per year . The company plans to be in business forever . What is the price of this stock if
a . an investor wants a return of 4 %?