www.fin419help.com P9-7 Net present value. Quark Industries has a project with the following projected cash flows: a. Using a discount rate of 9% for this project and the NPV model, determine whether the company should accept or reject this project. b. Should the company accept or reject it using a discount rate of 17%? c. Should the company accept or reject it using a discount rate of 18%? P9-8 (similar to) Net present value. Lepton Industries has a project with the following projected cash flows: Initial cost: $470,000 Cash flow year one: $121,000 Cash flow year two: $260,000 Cash flow year three: $181,000 Cash flow year four: $121,000 a. Using a discount rate of 9% for this project and the NPV model, determine whether the company should accept or reject this project. b. Should the company accept or reject it using a discount rate of 14%? c. Should the company accept or reject it using a discount rate of 21%? P16-5 (similar to) Break-even EBIT (with and without taxes). Alpha Company is looking at two different capital structures, one an all-equity firm and the other a levered firm with $4.8 million of debt financing at 7% interest. The all-equity firm will have a value of $8 million and 400,000 shares outstanding. The levered firm will have 160,000 160,000 shares outstanding. a. Find the breakeven EBIT for Alpha Company using EPS if there are no corporate taxes. b. Find the break-even EBIT for Alpha Company using EPS if the corporate tax rate is 15%. c. What do you notice about these two break-even EBITs for Alpha Company? P7-1 (similar to) Anderson Motors, Inc. has just set the company dividend policy at $0.85 per year. The company plans to be in business forever. What is the price of this stock if a. an investor wants a return of 4%? b. an investor wants a return of 7%? c. an investor wants a return of 9%? d. an investor wants a return of 16%? e. an investor wants a return of 18%? P7-2 (similar to) Dietterich Electronics wants its shareholders to earn a return of 9% on their investment in the company. At what price would the stock need to be priced today if Dietterich Electronics had a a. $0.40 constant annual dividend forever? b. $1.10 constant annual
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