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 |
|||||||||||||||||
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 |
%? |
||