In: Finance
The first question:- below is the expected cash flow of the two
investment opportunities (Project A, Project B) available to
Rafidain, if you know that the net investment initial investment of
project (A) is JD 500,000, while the net investment for project B
is 600,000 JD. The company intends to finance the net investment
for both projects according to the following: 40% with long-term
loans, interest rate 8%, 40% in ordinary shares, if you know that
the risk-free rate is 2%, the existing risk premium is 10%, and the
beta is 1.5%. And 20% financing with retained profits. The tax rate
is 30%.
Project A: First year 200,000, second year 200,000, third year
150,000, fourth year 50,000.
The second project B: the first year 150,000, the second year
150,000, the third year 250,000, the fourth year 150,000.
REQUIRED ;- The two projects are required to be evaluated in the
light of
1- The standard of the period of recovery
2 - the price of the profitability index.