Advised when evaluating a capital project

Assignment Help Financial Management
Reference no: EM131176489

Which one of the following is advised when evaluating a capital project in a foreign country if you are concerned about political risk?

The project cash flows should be decreased to account for the political risk.

The project should be abandoned until this risk is eliminated.

The domestic discount rate should be increased to account for the added risk.

The project's cost of capital rate should be decreased to offset the perceived risk.

Reference no: EM131176489

Questions Cloud

Specializes in analyses of firms capital structures : Assume that you have just been hired by Adams, Garitty, and Evans (AGE), a consulting firm that specializes in analyses of firms’ capital structures. Your boss has asked you to examine the capital structure of Campus Deli and Sub Shop (CDSS), which i..
What are the risk-neutral probabilities : J&B Drilling Company has recently acquired a lease to drill for natural gas in the remote region of southwest Louisana and southeast Texas. The area has long been known for oil and gas production, and the company is optismistic about the prospects of..
What is the current price of blue devil stock : Blue Devil Corporation stock, of which you own 500 shares, will pay a $2 per share dividend one year from today. Two years from now Blue Devil will close its doors and stockholders will receive a liquidating dividend of $17.5375 per share. The requir..
Best means of reducing or offsetting political risk : Which one of these is probably the best means of reducing or offsetting political risk?
Advised when evaluating a capital project : Which one of the following is advised when evaluating a capital project in a foreign country if you are concerned about political risk?
Firm is considering two mutually exclusive : Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown below. The required rate of return on projects of both of their risk class is 10 percent, and that the maximum allowable payback and discounted payba..
What is the present value of the break-even point : Luke Athletics Inc. has purchased a $200,000 machine to produce tennis balls. The machine will be fully depreciated by the straight-line method for its economic life of five years and will be worthless after its life. What is the present value of the..
What will its dividend payout ratio be : Your company has decided that its capital budget during the coming year will be $20 million. Its optimal capital structure is 60 percent equity and 40 percent debt. Its earnings before interest and taxes (EBIT) are projected to be $34.667 million for..
Calculate the present value of the associated profit : Customers 1, 2, and 3 have gross values for the product of v1 = 12, v2 = 10, and v3 = 7, respectively. Consumers buy at most one unit of the good over the 2 periods. There are only 2 selling periods. If the monopolist makes no sales in the first peri..

Reviews

Write a Review

Financial Management Questions & Answers

  How much would he have to invest today

Greg Lawrence anticipates he will need approximately $227,300 in 14 years to cover his 3-year-old daughter’s college bills for a 4-year degree. How much would he have to invest today, at an interest rate of 10 percent compounded semi annually?

  Estimate the firms weighted average cost of capital

Assume that you have been hired as a consultant by CGT, a major producer of chemicals and plastics, including plastic grocery bags, styrofoam cups, and fertilizers, to estimate the firm's weighted average cost of capital. The firm's tax rate is 40%. ..

  Two parts and pertains to the yield curve

The following question has two parts and pertains to the yield curve. Suppose on February 6, 2007, the following information is available from the Treasury spot curve: What is the implied forward rate on a one-year zero coupon Treasury one year from ..

  How much will you save in interest by making extra payments

Suppose you take out a 30 year mortgage for $ 175000 at 9% interest. The monthly payments on this loan are $ 1408.09. If you pay an extra 10% per month on your mortgage, how soon will you pay off the loan? How much will you save in interest by making..

  The value of gillettes stock

Assume Gillette corporation will pay an annual dividend of 0.67 One year from now. Analysts expect this dividend to grow at 11.3% per year thereafter until the 6th year. Thereafter, growth will level of at 2.3% per year. According to the dividend-dis..

  Prepare depreciation schedule using sum-of-the-year method

The price of a laser printer purchased by Paul's Printers and Office Supplies was $713. It cost $27 for delivery. The salvage value at the end of a 5-year life is $65. Prepare a depreciation schedule using the sum-of-the-year's method, and then enter..

  Replacement analysis-What is the NPV of the project

Mississippi River Shipyards is considering the replacement of an 8-year-old riveting machine with a new one that will increase earnings before depreciation from $30,000 to $44,000 per year. What is the NPV of the project?

  Units of production depreciation method

Oil Company may calculate depreciation using the “units of production” method of depreciation. Consider a depreciable asset costing $100,000 that is expected to have a useful life of 120,000 units. Salvage value is estimated to be $20,000. Estimated ..

  The bonds make semiannual payments-risk-free rate

You are given the following information for Watson Power Co. Assume the company’s tax rate is 40 percent. Debt: 8,000 6.3 percent coupon bonds outstanding, $1,000 par value, 20 years to maturity, selling for 106 percent of par; the bonds make semiann..

  Would like to invest in the stock market

Milly Jaeger, a private investor, would like to invest in the stock market, but does not have sufficient funds for the next two months. Thus, Jaeger buys an S&P 500 futures contract with a September settlement date when the S&P 500 index is at the le..

  What will these equal payments be

Mr. Bill. S. Preston, Esq., purchased a new house for $100,000. He paid $15,000 upfront and agreed to pay the rest over the next 10 years in 10 equal annual payments that include principal payments plus 13 percent compound interest on the unpaid bala..

  Financial and business risks within business structure

With any type of business venture there is always risk involved and we have to look at capital structure decisions as we move through changing economic times. What is a business risk and what are some of the factors that influence a firm’s business r..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd