Question
In: Finance
Company XYZ decides to invest in a $25,000,000 project. The company will finance the project with...
Company XYZ decides to invest in a $25,000,000 project. The company will finance the project with 50% debt and 50% equity. The term of the loan is interest only, compounded annually, 5%, and over 5 years. The project will allow the company to produce and sell an additional 100,000 widgets at $130 a widget. The cost of producing each widget is 50% of revenue. Furthermore, the project will fully depreciate in 5 years on a straight-line basis and the project will end. The tax rate is 21%
- What is 1st year CF to equity holders?
- What is the 5th year CF to equity holders?
- What is the IRR?
- If the company’s required rate on this project is 10%, what is the NPV?
- Would you accept it?
Solutions
jeff jeffy answered 2 years agoRelated Solutions
Company XYZ decides to invest in a $25,000,000 project. The company will finance the project with...
Company XYZ decides to invest in a $25,000,000 project. The
company will finance the project with 50% debt and 50% equity. The
term of the loan is interest only, compounded annually, 5%, and
over 5 years. The project will allow the company to produce and
sell an additional 100,000 widgets at $130 a widget. The cost of
producing each widget is 50% of revenue. Furthermore, the project
will fully depreciate in 5 years on a straight-line basis and the
project...
NPV and IRR and Cashflows of Finite Projects Company XYZ decides to invest in a $25,000,000...
NPV and IRR and Cashflows of Finite
Projects
Company XYZ decides to invest in a $25,000,000 project. The
company will finance the project with 50% debt and 50% equity. The
term of the loan is interest only, compounded annually, 5%, and
over 5 years. The project will allow the company to produce and
sell an additional 100,000 widgets at $130 a widget. The cost of
producing each widget is 50% of revenue. Furthermore, the project
will fully depreciate in 5...
If Company XYZ plans to invest in a project with initial capital outlay $52,125, annual net...
If Company XYZ plans to invest in a project with initial capital
outlay $52,125, annual net cash inflow $12,000 for 8 years, and
discount rate 12%, what is the Company XYZ’s NPA, IRR, MIRR,
Payback period, and Discounted Payback Period?
When a company decides to finance a new project, they can either borrow money via bonds...
When a company decides to finance a new project, they can either
borrow money via bonds or issue stock. What are the advantages and
disadvantages of each option? Explain your reasoning.
When a company decides to finance a new project, they can either borrow money via bonds...
When a company decides to finance a new project, they can either
borrow money via bonds or issue stock. What are the advantages and
disadvantages of each option? Explain your reasoning.
When a company decides to finance a new project, they can either borrow money via bonds...
When a company decides to finance a new project, they can either
borrow money via bonds or issue stock. What are the advantages and
disadvantages of each option? Explain your reasoning.
XYZ Industries paid $ 25,000,000 million in dividends in 2013 The balance of retained earnings in...
XYZ
Industries paid $ 25,000,000 million in dividends in 2013 The
balance of retained earnings in 2012 was $ 250,000,000 and the
balance of retained earnings in 2013 was $ 275,000,000 XYZ's net
income in 2013 was
Mohsin Group of Companies is planning to invest $ 150,000 on a project. The finance manager...
Mohsin Group of Companies is planning to invest $
150,000 on a project. The finance manager of Mohsin Group
of Companies has estimated the annual cash inflows of two different
projects i.e. project A and Project B as below:
Particulars
Project A
Project B
Initial Investment
150,000
150,000
Annual Cash inflows
Year
1
25,000
40,000
2
30,000
45,000
3
35,000
45,000
4
40,000
45,000
5
25,000
40,000
As Finance Executive of Mohsin Group of Companies, you are
required to evaluate...
XYZ Company will invest with an initial investment of $ 1 million. The assumption of a...
XYZ Company will invest with an
initial investment of $ 1 million. The assumption of a market
interest rate of 5% and cash flow for 5 years is expected as in the
table below:
year
Cash Flow
1
425.000
2
384.000
3
321.500
4
282.500
5
200.000
Calculate the payback period and Net
Present Value (NPV)
A group of investors decides to invest $500,000 in the stocks of three companies. Company D...
A group of investors decides to invest $500,000 in the stocks of
three companies.
Company D sells for $60 a share and has an expected growth of
16% per year
Company E sells for $80 a share and has an expected growth of
12% per year
Company F sells for $30 a share and has an expected growth of
9% per year.
The group plans to buy twice as many shares of company F as of
company E. If the...
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