Question

**Q1:** Carrefour is expecting its new center to
generate the following cash flows:

Years |
0 |
1 |
2 |
3 |
4 |
5 |
---|---|---|---|---|---|---|

Initial |
($35,000,000) |
|||||

Net operating cash-flow |
$6,000,000 |
$8,000,000 |
$16,000,000 |
$20,000,000 |
$30,000,000 |

a. Determine the payback for this new center. (1 mark)

b. Determine the net present value using a cost of capital of 15 percent. Should the project be accepted? (1 mark)

**Q2.** What is the EAC of two projects: project A,
which costs $150 and is expected to last two years, and project B,
which costs $190 and is expected to last three years? The cost of
capital is 12%. (1 mark)

**Q3**. A company pays annual dividends of $10.40
with no possibility of it changing in the next several years. If
the firm’s stock is currently selling at $80, what is the required
rate of return? (1 mark)

**Q4**. Stag corp has a capital structure which is
based on 50% common stock, 20% preferred stock and 30% debt. The
cost of common stock is 14%, the cost of preferred stock is 8% and
the pre-tax cost of debt is 10%. The firm's tax rate is 40%. (1
mark)

- Calculate the WACC of the firm.
- The firm is considering a project that is equally as risky as the firm's current operations. This project has initial costs of $280,000 and annual cash inflows of $66,000, $320,000, and $133,000 over the next three years, respectively. What is the net present value of this project ?

Answer #1

**1]**

**a]**

Payback period is the time taken for the cumulative cash flows to equal zero

Payback period = 3 + (cash flow required in year 4 for cumulative cash flows to equal zero / year 4 cash flow) = 3 + ($5,000,000 / $20,000,000) = 3.25 years

**b]**

NPV is calculated using NPV function in Excel

NPV is $13,137,167

Yes, the project should be accepted because the NPV is positive

Carrefour is expecting its new center to generate the following
cash flows:
Years
0
1
2
3
4
5
Initial
Investment
($35,000,000)
Net operating cash-flow
$6,000,000
$8,000,000
$16,000,000
$20,000,000
$30,000,000
a. Determine the payback for this new center. (1 mark)
b. Determine the net present value using a cost of capital of 15
percent. Should the project be accepted? (1 mark)
Answer:
Q2. What is the EAC of two projects: project A,
which costs $150 and is expected to last...

Fin 101
Assignment
Questions
Q1: Carrefour is expecting its new center to
generate the following cash flows:
Years
0
1
2
3
4
5
Initial
Investment
($35,000,000)
Net operating cash-flow
$6,000,000
$8,000,000
$16,000,000
$20,000,000
$30,000,000
a. Determine the payback for this new center. (1 mark)
b. Determine the net present value using a cost of capital of 15
percent.Should the project be accepted? (1 mark)
Answer:
Q2.What is the EAC of two projects: project A,
which costs $150 and is...

Q2. What is the EAC of two projects: project A,
which costs $150 and is expected to last two years, and project B,
which costs $190 and is expected to last three years? The cost of
capital is 12%. (1 mark)
Answer:
Q3. A company pays annual dividends of $10.40
with no possibility of it changing in the next several years. If
the firm’s stock is currently selling at $80, what is the required
rate of return? (1 mark)
Answer:n

A project will produce an operating cash flow of $358,000 a year
for four years. The initial cash outlay for equipment will be
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net working capital that will be fully recovered when the project
ends. What is the net present value of the project if the required
rate of return is 14 percent?
$237,613
$251,159
$274,300
$290,184
$309,756...

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rate of return) for each source of financing is as follows:
Source of Capital
Cost
Weight
Long-Term Debt
4%
59%
Preferred Stock
10%
18%
Common Stock
14%
23%
What is the net present value of this project?

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$400,000, and $550,000 over the next 3...

1. A project has an initial outlay of $1,732. The project will
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2.A...

1. Project K costs $52,125 at time 0, its expected cash inflows
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2. Patton Corporation has a target capital structure of 60% debt
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Marshall Law firm expects to generate free-cash flows of
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