Question

In: Finance

Watson Inc. is an all equity company. Their rs is 11%. Risk free rate is 3%....

Watson Inc. is an all equity company. Their rs is 11%. Risk free rate is 3%. They are considering a project that will cost $10 million and last 5 years. The project will generate revenues minus expenses of $3 million per year. If the tax rate is 40% should the company go forward with the project. What is the NPV? Reference the group problem in class.

Solutions

Expert Solution


Related Solutions

a) Baxter International has an equity beta of 0.8, a risk-free rate of 3% and a...
a) Baxter International has an equity beta of 0.8, a risk-free rate of 3% and a market portfoli return of 11%. The firm has a debt-to-equity ratio of 0.5 with the cost of debt at 6%. The marginal tax rate is 40%. What is the cost of capital of the firm, if CAPM holds? b) Suppose the firm is also considering a warehouse renovation costing $60 million that is expected to generate cost savings of $12 million per year for...
Watson, Inc., is an all-equity firm. The cost of the company’s equity is currently 13 percent,...
Watson, Inc., is an all-equity firm. The cost of the company’s equity is currently 13 percent, and the risk-free rate is 4.1 percent. The company is currently considering a project that will cost $11.58 million and last six years. The company uses straight-line depreciation. The project will generate revenues minus expenses each year in the amount of $3.26 million.    If the company has a tax rate of 40 percent, what is the net present value of the project? (Enter...
Watson, Inc., is an all-equity firm. The cost of the company’s equity is currently 13 percent,...
Watson, Inc., is an all-equity firm. The cost of the company’s equity is currently 13 percent, and the risk-free rate is 4.3 percent. The company is currently considering a project that will cost $11.64 million and last six years. The company uses straight-line depreciation. The project will generate revenues minus expenses each year in the amount of $3.28 million. If the company has a tax rate of 35 percent, what is the net present value of the project?
Watson, Inc., is an all-equity firm. The cost of the company’s equity is currently 12 percent,...
Watson, Inc., is an all-equity firm. The cost of the company’s equity is currently 12 percent, and the risk-free rate is 4.8 percent. The company is currently considering a project that will cost $11.79 million and last six years. The company uses straight-line depreciation. The project will generate revenues minus expenses each year in the amount of $3.33 million.    If the company has a tax rate of 35 percent, what is the net present value of the project? (Enter...
Watson, Inc., is an all-equity firm. The cost of the company’s equity is currently 12 percent,...
Watson, Inc., is an all-equity firm. The cost of the company’s equity is currently 12 percent, and the risk-free rate is 4.8 percent. The company is currently considering a project that will cost $11.79 million and last six years. The company uses straight-line depreciation. The project will generate revenues minus expenses each year in the amount of $3.33 million.    If the company has a tax rate of 35 percent, what is the net present value of the project? (Enter...
Cost of Common Equity: Cost of Retained Earnings, rs: Suppose that (1) the risk-free return is...
Cost of Common Equity: Cost of Retained Earnings, rs: Suppose that (1) the risk-free return is 5.5%; (2) the average stock return (i.e. the market return) is 11.5%; (3) your firm stock’s beta (i.e. stock’s risk) is 0.8; (4) the next dividend payment will be $1; (4) the growth rate of the dividend is 6%; (5) the current market price of the stock is $25; (6) the yield of your firm’s long-term bond is 6.5%; and (7) the risk premium...
THE ANSWER IS NOT -3,790,792.61 Watson, Inc., is an all-equity firm. The cost of the company’s...
THE ANSWER IS NOT -3,790,792.61 Watson, Inc., is an all-equity firm. The cost of the company’s equity is currently 13 percent, and the risk-free rate is 4.1 percent. The company is currently considering a project that will cost $11.58 million and last six years. The company uses straight-line depreciation. The project will generate revenues minus expenses each year in the amount of $3.26 million.    If the company has a tax rate of 40 percent, what is the net present...
The annualized risk-free rate in the eurozone is 3% and the annualized UK risk-free rate is...
The annualized risk-free rate in the eurozone is 3% and the annualized UK risk-free rate is 5%. The spot quote is €1.20/£ while the one year forward quote is €1.25/£. You can borrow either €1,000,000 or £833,333.33. According to interest rate parity, is the forward quote correct? If not, what should it be? If the forward quote is not correct, how much money would you profit if you implemented the proper arbitrage? Multiple Choice: Forward rate should be €1.2643/£; arbitrage...
The market return is 10% and the risk free rate is 3%. Rascals Inc. has a...
The market return is 10% and the risk free rate is 3%. Rascals Inc. has a market beta of 1.0, a SMB beta of −.60, and a HML beta of −0.85. If the risk premium on HML and SMB are both 2%, using the Fama-French Three Factor Model, what is the expected Return on Rascal Inc. stock?
suppose risk free rate is 5 % , return on market is 11 % , and...
suppose risk free rate is 5 % , return on market is 11 % , and return on stock B is 14 % . a Calculate Stock B's beta, B.marvin has investments with the following characteristics in his protfolio expect inv amount return Invested abc 30% 10k efg 16% 50k qrp 20% 40k suppose risk free rate is 5 % , return on market is 11 % , and return on stock B is 14 % . a Calculate Stock...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT