FIN 419 Expect Success/uophelp.com FIN 419 Expect Success/uophelp.com | Page 27

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%?
b.
an investor wants a return of 7%?
c.
an investor wants a return of 9%?
d.
an investor wants a return of 16%?
e.
an investor wants a return of 18%?
P7-2 (similar to)