Company uses the npv method when choosing projects

Assignment Help Financial Management
Reference no: EM131304700

Suppose Tapley Inc. uses a WACC of 8% for below-average risk projects, 10% for average-risk projects, and 12% for above-average risk projects. Which of the following independent projects should Tapley accept, assuming that the company uses the NPV method when choosing projects? a. Project A, which has average risk and an IRR = 9%. b. Project B, which has below-average risk and an IRR = 8.5%. c. Project C, which has above-average risk and an IRR = 11%. d. Without information about the projects’ NPVs we cannot determine which project(s) should be accepted. e. All of these projects should be accepted.

Reference no: EM131304700

Questions Cloud

Always increase company market value : Which of the following does NOT always increase a company’s market value?
Steps taken in the financial planning process : Which of the following is NOT one of the steps taken in the financial planning process?
Rules is correct for capital budgeting analysis : Which of the following rules is CORRECT for capital budgeting analysis? The interest paid on funds borrowed to finance a project must be included in estimates of the project’s cash flows.
Is michael entitled to discharge of debt : Michael and Dianne Shankle divorced. An Arkansas state court ordered Michael to pay Dianne alimony and child support, as well as half of the $184,000 in their investment accounts. Is Michael entitled to a discharge of this debt, or does it qualify as..
Company uses the npv method when choosing projects : Suppose Tapley Inc. uses a WACC of 8% for below-average risk projects, 10% for average-risk projects, and 12% for above-average risk projects. Which of the following independent projects should Tapley accept, assuming that the company uses the NPV me..
The analysis of a capital budgeting project : Which of the following is NOT a relevant cash flow and thus should not be reflected in the analysis of a capital budgeting project? Changes in net working capital. Shipping and installation costs.
Assume a project has normal cash flows : Assume a project has normal cash flows. A project’s IRR increases as the WACC declines. A project’s NPV increases as the WACC declines. A project’s MIRR is unaffected by changes in the WACC.
What is the value of the portfolio in one year : Madeline Manufacturing Inc.’s current stock price is $40 per share. Call options for this stock exist that permit the holder to purchase one share at an exercise price of $30. After the payoffs have been equalized and the riskless hedged investment i..
Payoffs have been equalized-riskless hedged investments : Madeline Manufacturing Inc.’s current stock price is $40 per share. Call options for this stock exist that permit the holder to purchase one share at an exercise price of $30. After the payoffs have been equalized and the riskless hedged investment i..

Reviews

Write a Review

Financial Management Questions & Answers

  What is npv of project and is it worthwhile to buy item

Considering purchasing of 360000 items with life of 5 years. Will depreciate over five years using straight line method. Market value of item will be 60000 in five years the item will replace five office employees whose combined annual salaries are 1..

  Price of a non-dividend paying stock

The price of a non-dividend paying stock is $19.24 and the price of a 3-month European put option on the stock with a strike price of $20 is $4.22. The risk-free rate is 5% per annum. What is the price of a 3-month European call option with a strike ..

  How much would you need to put down to get your payment

You want to purchase a truck for $25,000 and you have $3,450 to put down. a. How much will your payments be if you financed the truck for 60 months at 6%? b. How much would the payment be if rate of interest is 5% and you only financed the truck for ..

  The project since the? after-tax cash flows

Jordan Enterprises is considering a capital expenditure that requires an initial investment of $ 63,000 and returns after tax cash inflows $13,246 per year for 10 years. The firm has a maximum acceptable payback period of 8 years.  The company should..

  Basis in the equipment received in the exchange

Fred and Sarajane exchanged equipment in a qualifying-like-kind exchange, Fred gives up equipment with an adjusted basis of $14,000 (fair market value of $15,000)in exchange for Sarajane's equipment with a fair market value of $12,000 plus $3,000 cas..

  An otherwise identical but levered firm

An unlevered firm has a value of $700 million. An otherwise identical but levered firm has $130 million in debt at a 5% interest rate. Its cost of debt is 5% and its unlevered cost of equity is 11%. No growth is expected. Assuming the corporate tax r..

  Current value-calculate the yield-to-maturity

What is the current value of a $1,000 par value perpetual bond to an investor who requires a 10 percent annual rate of return? The perpetual bond pays inter- est at the rate of 8 percent per year. Cellular International zero coupon bonds (par value $..

  Cash flows for cash from financing activities

Walker Corporation conducted the following activities during 2001: (1) they sold 10,000 shares of their own stock for $15.00 per share; (2) they issued bonds for which they received $493,000;

  What is your rate of return

Assume that on 1/1/12 you purchased an investment for $3000. The investment pays you $200 on 12/31 of every year that you hold the security. On 1/1/17 you sell the investment for $3500. What is your rate of return? Round your answer to the nearest te..

  Debt–total asset ratios

Firm A and Firm B have debt–total asset ratios of 40 percent and 30 percent and returns on total assets of 9 percent and 14 percent, respectively. What is the return on equity for Firm A and Firm B?

  If a stocks beta is equal to one

If a stock's beta is equal to one, then

  Maintain a weighted average cost of capital

Webster's Watering Hole must maintain a weighted average cost of capital of 9% to satisfy covenants in the bond indenture. Analysts forecast the after tax cost of debt of 5% and a cost of equity of 11%. What debt-equity ratio must be employed to meet..

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