ch. 11 financial mgmt hw

7/30/2019 Ch. 11 Financial Mgmt Hw

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1

No,it is not following a logical approach to using cost of capital because each indivuual proj

5

Kd = Yield (1-T)

Yield (1-T)

a. 6.0% (1-.16)

b. 12.6% (1-.35

c 9.4% (1-.24)

6

Kd= Yield (1-T)

Yield (1-T)

a. 8.00% (1-.28)

b. 11.40% (1-.40)

c. 7.50% (1-0)

9

a 78+(1000-875)/25/.6*875+4*1000

8.97%

b. Kd= Yield (1-T)

8.97% (1-.30)

8.97% (.70)

6.28%

11

a Kd= Yield (1-T)

11.40% (1-.35)

11.40%(.65)

7.41%

b down because the larger tax deduction offsets the higher rate

13

a. 7.79%

b. No we do not need to make a tax adjustment.

16

a. 13%

b 13.29%

18


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a. 1.87 (n=6) g=11%

b. 2.08$

c. 0.83$

d. 15.61%

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After tax Cos

Debt (Kd) 7.00%

Preferred stock (Kp) 10

Common equity (Ke) (retained earnings)

Weighted average cost of capital (Ka) 13

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10% (1-.34)

10%(.66)

6.60%

9.11%

11%

Cost (aftertax

Debt (Kd) 6.60%

Preferred stock (Kp) 9.11Common equity (Ke) (retained earnings)

Weighted average cost of capital (Ka) 11

Ch.12

1

100000

5000050000

15000

35000

50000

85000


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3

a. 500000

0

500000

200000

300000

0

cashflow 300000

b.

500000

500000

0

0

0

500000

cashflow 500000

c.

200000

6 X

200000-60000 1

140000-90000 2

50000-50000 3

7

A

50000-10000 1

40000-11000 2

29000-13000 3

16000-16000 4

10a.

b. A B

11011 13031

10000 10000

Net Present 1011 3031

They will go with x because they are going to get paid bac

They will go with B because they are going to get paid bac

Pick Project A for shorter paying period.

Choose B, it has the highest net present value.


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c. A company should normally have more confidence with B because the net pre

12

PVIFA 4.623

IRR 0.08

N 6

14

Sum of Prese 167109

Sum of Prese 160000

Net present 7109

15

Sum of Prese 97355

Sum of Prese 101265

Net present -3910

No, it is negative.

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a.

Sum of Prese 58865

Sum of Prese 45000

Net present 13865Yes

b.

24.60%

c.

20

a.

1 14120

2 155403 19008

4 21800

5 24000

Total 94468

b.

1 16890

Dont buy the machine. It has a return less than 12

Since the net present value is positive, they should

Since the net present value is positive, they should go through wi


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2 17784

3 20800

4 22800

5 24000

Total 102274

c.

PVIF 0.654545455

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a.

8000 for project E

5000 for project H

b. Prject E

Sum of Prese 22121

Sum of Prese 20000

Net present 2121

Project H

Sum of Prese 21970

Sum of Prese 20000

Net present 1970

d.

e.1 6% cost of capital Project E

2 13% cost of capital Project H

3 Neither

27

26640

35600

11840

5920

80000Sum of Prese 87977

Sum of Prese 80000

Net present 7977

33

a.

No, but the looking at the net present value makes it loo

Appendix B used for 3. with about 15 percent.

Both project with have positive net present value but Project E is better tha


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Purchase Pric 60000

Depreciation 31200

Book Value 28800

b.

Book Value 28800

Sales Price 23800

5000

c.

tax loss 5000

Tax 0.35

1750

d.

23800

1750

25550

e.

150000

25550

124450

f.

1 30000

2 48000

3 28800

4 17250

5 172506 8700

7 150000

g.

1 11520

2 6900

3 6900

4 3480

h.

1 64682 14385

3 7665

4 4819

5 6038

6 3045

i.


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1 37050

2 31850

3 30550

4 29250

5 27300

6 20150

j.

1 38862

2 36849

3 27209

4 21668

5 18903

6 11760

155251

k.

Sum of Prese 155251

Sum of Prese 124450

Net present 30801


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ct shoud not be judged against the means of financing that project. Instead it should be measur

Yield (1-T)

5.04%

8.19%

7.14%

Yield (1-T)

5.76%

6.84%

7.50%


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Weights Weighted Cost

35% 44.4500%

15 1.5

50 6.5

10.45%

) Weighted Cost

Weights

30% 1.98%

10 0.91

60 6.6

9.49%


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Y

200000-4000 1

160000-7000 2

90000-80000 3

10000/20000 4

B

50000-20000 1

30000-25000 2

5000-15000 0.33

faster.

faster.


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sent value is going to consider all of the inflows and the time value of the money.

o through with the project.

th the project.


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like a safer choice.

Project H.


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ed against the weighted average cost of paying for all projects. And finally when you get the fina


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l overall cost, the heating compound that yeilded 14% is more likely to be accepted.

ch. 11 financial mgmt hw

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