Question

Oliver Oil Rigs is considering the purchase of a new drill for its mining operation. Oliver...

Oliver Oil Rigs is considering the purchase of a new drill for its mining operation. Oliver is currently financed 100% with equity and the new drill investment has similar risks to Oliver's prior investment projects. What cost of capital measure should Oliver use to calculate the NPV of the drill purchase?

Group of answer choices

NCF

NWC

IRR

CAPM re

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Answer
CAPM

Explanation:

NCF( Net Cash flow) and NWC ( Net woking capital) is not rate for measures cost of capital.

The internal rate of return is a discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero. so for calculte NPV irr is not use.

The Capital Asset Pricing Model describes the relationship between systematic risk and expected return for assets. CAPM is widely used throughout finance for pricing risky securities and generating expected returns for assets given the risk of those assets and cost of capital

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Oliver Oil Rigs is considering the purchase of a new drill for its mining operation. Oliver...
Oliver Oil Rigs is considering the purchase of a new drill for its mining operation. Oliver is currently financed 100% with equity and the new drill investment has similar risks to Oliver's prior investment projects. What cost of capital measure should Oliver use to calculate the NPV of the drill purchase?
Oliver Oil Rigs is considering the purchase of a new drill for its mining operation. Oliver...
Oliver Oil Rigs is considering the purchase of a new drill for its mining operation. Oliver is currently financed 100% with equity and the new drill investment has similar risks to Oliver's prior investment projects. What cost of capital measure should Oliver use to calculate the NPV of the drill purchase?
Cohn and Sitwell, Inc., is considering manufacturing special drill bits and other equipment for oil rigs....
Cohn and Sitwell, Inc., is considering manufacturing special drill bits and other equipment for oil rigs. The proposed project is currently regarded as complementary to its other lines of business, and the company has certain expertise by virtue of its having a large mechanical engineering staff. Because of the large outlays required to get into the business, management is concerned that Cohn and Sitwell earn a proper return. Since the new venture is believed to be sufficiently different from the...
Section 6: Wally's Water Delivery Company is considering buying a second delivery truck so that it...
Section 6: Wally's Water Delivery Company is considering buying a second delivery truck so that it can expand its operations. The company currently has $250,000 in annual sales. The truck will cost $45,000. Wally believes that the second truck will allow his company to increase its cash flows by $25,000 in the first year. The cash flows associated with the new truck are expected to increase by 25% each year (vs. the prior year) for years 2, 3, and 4....
Sunshine Smoothies Company (SSC) manufactures and distributes smoothies. SSC is considering the development of a new...
Sunshine Smoothies Company (SSC) manufactures and distributes smoothies. SSC is considering the development of a new line of high-protein energy smoothies. SSC's CFO has collected the following information regarding the proposed project, which is expected to last 3 years: The project can be operated at the company's Charleston plant, which is currently vacant. The project will require that the company spend $3.8 million today (t = 0) to purchase additional equipment. For tax purposes the equipment will be depreciated on...
Sunshine Smoothies Company (SSC) manufactures and distributes smoothies. SSC is considering the development of a new...
Sunshine Smoothies Company (SSC) manufactures and distributes smoothies. SSC is considering the development of a new line of high-protein energy smoothies. SSC's CFO has collected the following information regarding the proposed project, which is expected to last 3 years: The project can be operated at the company's Charleston plant, which is currently vacant. The project will require that the company spend $4.1 million today (t = 0) to purchase additional equipment. For tax purposes the equipment will be depreciated on...
he coal mining industry has been hard-hit by environmental regulations. Recently, however, a combination of increased...
he coal mining industry has been hard-hit by environmental regulations. Recently, however, a combination of increased demand for coal and new pollution reduction technologies has led to an improved market demand for coal. WHC has just been approached by Mid-Cen Electric Company with a request to supply coal for its electric generators for the next eight years. WHC does not have enough excess capacity at its existing mines to guarantee the contract. The company is considering opening a strip mine...
Quantitative Problem: Sunshine Smoothies Company (SSC) manufactures and distributes smoothies. SSC is considering the development of...
Quantitative Problem: Sunshine Smoothies Company (SSC) manufactures and distributes smoothies. SSC is considering the development of a new line of high-protein energy smoothies. SSC's CFO has collected the following information regarding the proposed project, which is expected to last 3 years: The project can be operated at the company's Charleston plant, which is currently vacant. The project will require that the company spend $4 million today (t = 0) to purchase additional equipment. For tax purposes the equipment will be...
STEPHENSON REAL ESTATE RECAPITALIZATION         Market value balance sheet before the land purchase is: Market value...
STEPHENSON REAL ESTATE RECAPITALIZATION         Market value balance sheet before the land purchase is: Market value balance sheet Assets $533,500,000 Equity $533,500,000 Total assets $533,500,000 Debt & Equity $533,500,000 Market value balance sheet after purchase of land: Note, to calculate the NPV of the project, you must perform a calculation to determine the earnings they will receive from this purchase                Market value balance sheet Old assets $533,500,000 NPV of project enter value Equity enter value Total assets Sum total...
What tools could AA leaders have used to increase their awareness of internal and external issues?...
What tools could AA leaders have used to increase their awareness of internal and external issues? ???ALASKA AIRLINES: NAVIGATING CHANGE In the autumn of 2007, Alaska Airlines executives adjourned at the end of a long and stressful day in the midst of a multi-day strategic planning session. Most headed outside to relax, unwind and enjoy a bonfire on the shore of Semiahmoo Spit, outside the meeting venue in Blaine, a seaport town in northwest Washington state. Meanwhile, several members of...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT