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) |
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Break-even EBIT |
( with and without |
taxes). |
Alpha Company is |
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looking at two different capital |
structures, one an |
all-equity firm and the |
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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 |
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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 |
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no corporate taxes. | |||||||||||||||||||
b. |
Find the |
break-even EBIT for Alpha Company using EPS if the |
|||||||||||||||||
corporate tax rate is 15 |
%. |
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c. |
What do you notice about these two |
break-even EBITs for Alpha |
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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 |
%? |
||