FIN 571 Week 1 Connect Problems( Math and Accounting
Review)
34. When estimating the cost of equity using the DDM, which one of these is most apt to add error to this estimate? 35. When computing WACC, you should use the: 36. The cost of preferred stock: 37. No matter how many forms of investment analysis you employ: 38. Which statement concerning the net present value( NPV) of an investment or a financing project is correct? 39. The net present value method of capital budgeting analysis does all of the following except: 40. Graham and Harvey( 2001) found that _____ were the two most popular capital budgeting methods. 41. The primary reason that company projects with positive net present values are considered acceptable is that: 42. What is the net present value of a project with an initial cost of $ 36,900 and cash inflows of $ 13,400, $ 21,600, and $ 10,000 for Years 1 to 3, respectively? The discount rate is 13 percent. 43. Flatte Restaurant is considering the purchase of a $ 10,800 soufflé maker. The soufflé maker has an economic life of five years and will be fully depreciated by the straight-line method. The machine will produce 2,400 soufflés per year, with each costing $ 2.80 to make and priced at $ 5.65. Assume that the discount rate is 16 percent and the tax rate is 35 percent. What is the NPV of the project? Should the company make the purchase? 44. A project costing $ 6,200 initially should produce cash inflows of $ 2,860 a year for three years. After the three years, the project will be shut down and will be sold at the end of Year 4 for an estimated net cash amount of $ 3,300. What is the net present value of this project if the required rate of return is 11.3 percent? 45. Down Under Boomerang, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $ 2.73 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which it will be worthless. The project is estimated to generate $ 2,090,000 in annual sales, with costs of $ 785,000. The tax rate is 30 percent and the required return is 13 percent. What is the project’ s NPV?
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FIN 571 Week 1 Connect Problems( Math and Accounting
Review)