55. Americo Corp is considering construction of a manufacturing plant in Brazil. The initial investment will cost 14 million Brazilian reals (R). The company plans to keep the plant open for 3 years during which cash flows from operations will be 5million, 5million and 4 million reals respectively at end each of the three years. At end of the third year Americo plans to sell the plant for 10 million reals. Americo’s required rate of return is 15% and the current exchange rate R/$ is 3.87. If the real is expected to depreciate by 5% per year determine the NPV for this project. Should Americo build this plant? Can you please show me step by step how to do this? Thank you!

McNabb Construction Company is trying to calculate its cost of capital for use in making a capital budgeting decision. Mr. Reid, the vice-president of finance, has given you the following information and has asked you to compute the weighted average cost of capital.

The company currently has an outstanding bond with a 10.8 percent coupon rate and another bond with a 11.5 percent rate. The firm has been informed by its investment dealer that bonds of equal risk and credit ratings are now selling to yield 12.2 percent. The common stock has a price of $99.00 and an expected dividend (D₁) of $4.95 per share. The historical growth pattern (g) for dividends is as follows:

The preferred stock is selling at $90 per share and pays a dividend of $8.50 per share. The corporate tax rate is 35 percent. The flotation cost is 2.9 percent of the selling price for preferred stock. The optimum capital structure for the firm is 25 percent debt, 25 percent preferred stock, and 50 percent common equity in the form of retained earnings.

a. Compute the historical growth rate. (Round intermediate calculations to 2 decimal places. Round the final to 2 decimal places.)

Growth rate             %

b. Compute the cost of capital for the individual components in the capital structure. (Round growth rate to 2 decimal places. Round the final answers to 2 decimal places.)

c. Calculate the weighted cost of each source of capital and the weighted average cost of capital. (Round your intermediate calculations to 2 decimal places. Round the final answers to 2 decimal places.)

McNabb Construction Company is trying to calculate its cost of capital for use in making a capital budgeting decision. Mr. Reid, the vice-president of finance, has given you the following information and has asked you to compute the weighted average cost of capital.

The company currently has an outstanding bond with a 10.8 percent coupon rate and another bond with a 11.5 percent rate. The firm has been informed by its investment dealer that bonds of equal risk and credit ratings are now selling to yield 12.2 percent. The common stock has a price of $99.00 and an expected dividend (D₁) of $4.95 per share. The historical growth pattern (g) for dividends is as follows:

The preferred stock is selling at $90 per share and pays a dividend of $8.50 per share. The corporate tax rate is 35 percent. The flotation cost is 2.9 percent of the selling price for preferred stock. The optimum capital structure for the firm is 25 percent debt, 25 percent preferred stock, and 50 percent common equity in the form of retained earnings.

a. Compute the historical growth rate. (Round intermediate calculations to 2 decimal places. Round the final to 2 decimal places.)

Growth rate             %

b. Compute the cost of capital for the individual components in the capital structure. (Round growth rate to 2 decimal places. Round the final answers to 2 decimal places.)

c. Calculate the weighted cost of each source of capital and the weighted average cost of capital. (Round your intermediate calculations to 2 decimal places. Round the final answers to 2 decimal places.)

Edwards Construction currently has debt outstanding with a market value of $310,000 and a cost of 6 percent. The company has an EBIT of $18,600 that is expected to continue in perpetuity. Assume there are no taxes.

a. What is the value of the company’s equity and the debt-to-value ratio? (Do not round intermediate calculations. Leave no cells blank - be certain to enter "0" wherever required. Round your debt-to-value answer to 3 decimal places, e.g., 32.161.)

b. What is the equity value and the debt-to-value ratio if the company's growth rate is 3 percent? (Do not round intermediate calculations. Round your equity value to 2 decimal places, e.g., 32.16, and round your debt-to-value answer to 3 decimal places, e.g., 32.161.)

c. What is the equity value and the debt-to-value ratio if the company's growth rate is 5 percent? (Do not round intermediate calculations. Round your equity value to 2 decimal places, e.g., 32.16, and round your debt-to-value answer to 3 decimal places, e.g., 32.161.)

DYI Construction Co. is considering a new inventory system that will cost $750,000. The system is expected to generate positive cash flows over the next four years in the amounts of $350,000 in year one, $325,000 in year two, $150,000 in year three, and $180,000 in year four. DYI's required rate of return is 10%. What is the modified internal rate of return of this project?

DYI Construction Co. is considering a new inventory system that will cost $750,000. The system is expected to generate positive cash flows over the next four years in the amounts of $350,000 in year one, $325,000 in year two, $150,000 in year three, and $180,000 in year four. DYI's required rate of return is 11%. What is the modified internal rate of return of this project?

11.57%

14.35%

10.87%

13.06%

Americo Corp is considering construction of a manufacturing plant in Turkey. The initial invest will cost 15 million Turkish Lira (L). The company plans to keep the plant open for 3 years during which cash flows from operations will be 5million, 5million and 4 million Liras respectively at end each of the three years. At end of the third year Americo plans to sell the plant for 10 million liras. Americo’s required rate of return is 15% and the current exchange rate L/$ is 5.75. If the lira is expected to appreciate by 5% per year determine the NPV for this project. Should Americo build this plant?

Edwards Construction currently has debt outstanding with a market value of $300,000 and a cost of 8 percent. The company has an EBIT of $24,000 that is expected to continue in perpetuity. Assume there are no taxes.

What is the equity value and the debt-to-value ratio if the company's growth rate is 3 percent? (Do not round intermediate calculations. Round your equity value to 2 decimal places, e.g., 32.16, and round your debt-to-value answer to 3 decimal places, e.g., 32.161.)

Equity value is NOT 194,400 and debt value is NOT .607

What is the equity value and the debt-to-value ratio if the company's growth rate is 5 percent? (Do not round intermediate calculations. Round your equity value to 2 decimal places, e.g., 32.16, and round your debt-to-value answer to 3 decimal places, e.g., 32.161.)

Equity value is NOT 540000 and debt value is NOT .357

Edwards Construction currently has debt outstanding with a market value of $400,000 and a cost of 8 percent. The company has an EBIT of $32,000 that is expected to continue in perpetuity. Assume there are no taxes. a. What is the value of the company’s equity and the debt-to-value ratio? (Do not round intermediate calculations. Leave no cells blank - be certain to enter "0" wherever required. Round your debt-to-value answer to 3 decimal places, e.g., 32.161.) Equity value $ 0.00 Debt-to-value 1.00 b. What is the equity value and the debt-to-value ratio if the company's growth rate is 4 percent? (Do not round intermediate calculations. Round your equity value to 2 decimal places, e.g., 32.16, and round your debt-to-value answer to 3 decimal places, e.g., 32.161.) Equity value $ Debt-to-value c. What is the equity value and the debt-to-value ratio if the company's growth rate is 6 percent? (Do not round intermediate calculations. Round your equity value to 2 decimal places, e.g., 32.16, and round your debt-to-value answer to 3 decimal places, e.g., 32.161.) Equity value $ Debt-to-value