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Jabi , Lecturer
Category: Homework
Satisfied Customers: 1364
Experience:  I have done MBA in Finance and Accounting.
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WACC #1 What role does the cost of capital play in the overall

Customer Question


What role does the cost of capital play in the overall financial decision making of the firm’s top managers?


Why do you think debt offerings are more common than equity offerings and typically much larger as well?
Submitted: 4 years ago.
Category: Homework
Expert:  Jabi replied 4 years ago.
Hello dear client,

I have started work on this one and will post the answer for you pretty soon.

Let me know if you have more questions today, i would love to help you if i can.

Expert:  Jabi replied 4 years ago.
Hello dear client,

Click here for answer

Please hit ACCEPT BUTTON so that i get credit for all my efforts and time.

Jabi, Lecturer
Category: Homework
Satisfied Customers: 1364
Experience: I have done MBA in Finance and Accounting.
Jabi and 2 other Homework Specialists are ready to help you
Customer: replied 4 years ago.

i got a quiz to do actually my final I was thinking if we can do it together maybe I can confirm if I got them right prior to turn it in...can you help me ....there are 25 questions an I have 2 hours.

Expert:  Jabi replied 4 years ago.
Hello dear client,

Please post the questions, i would love to help you if i can ELSE i will leave your question open to other available experts who may have answer for your questions.

Customer: replied 4 years ago.
1. How does the net present value (NPV) decision rule relate to the primary goal of financial management, which is creating wealth for shareholders? (Points : 4)

2. An investment project provides cash flows of $1,190 per year for 10 years. If the initial cost is $8,000, what is the payback period? (Points : 4)

3. The present value of an investment's future cash flows divided by the initial cost of the investment is called the: (Points : 4)
net present value.
internal rate of return.
average accounting return.
profitability index.
profile period.

4. Mutually exclusive projects are best defined as competing projects which: (Points : 4)
would commence on the same day.
have the same initial start-up costs.
both require the total use of the same limited resource.
both have negative cash outflows at time zero.
have the same life span.

5. Phone Home, Inc. is considering a new 6-year expansion project that requires an initial fixed asset investment of $5.994 million. The fixed asset will be depreciated straight-line to zero over its 6-year tax life, after which time it will be worthless. The project is estimated to generate $5,328,000 in annual sales, with costs of $2,131,200. The tax rate is 31 percent. What is the operating cash flow for this project? (Points : 4)

6. The Lumber Yard is considering adding a new product line that is expected to increase annual sales by $238,000 and cash expenses by $184,000. The initial investment will require $96,000 in fixed assets that will be depreciated using the straight-line method to a zero book value over the 6-year life of the project. The company has a marginal tax rate of 32 percent. What is the annual value of the depreciation tax shield? (Points : 4)

7. In a single sentence, explain how you can determine which cash flows should be included in the analysis of a project. (Points : 4)

8. A project has a unit price of $5,000, a variable cost per unit of $4,000, fixed costs of $17,000,000, and depreciation expense of $6,970,000. What is the accounting break-even quantity? (Points : 4)

9. Variable costs are constant over the short-run regardless of the quantity of output produced. (Points : 4)

10. Forecasting risk is defined as the possibility that: (Points : 4)
some proposed projects will be rejected.
some proposed projects will be temporarily delayed.
incorrect decisions will be made due to erroneous cash flow projections.
some projects will be mutually exclusive.
tax rates could change over the life of a project.

11. A stock has an expected return of 11 percent, the risk-free rate is 6.1 percent, and the market risk premium is 4 percent.
Calculate the stock's beta. (Points : 4)

12. You own a portfolio that has $2,000 invested in Stock A and $1,400 invested in Stock B. The expected returns on these stocks are 14 percent and 9 percent, respectively. What is the expected return on the portfolio? (Points : 4)

13. Your portfolio is comprised of 40 percent of stock X, 15 percent of stock Y, and 45 percent of stock Z. Stock X has a beta of 1.16, stock Y has a beta of 1.47, and stock Z has a beta of 0.42. What is the beta of your portfolio? (Points : 4)

14. A group of individuals got together and purchased all of the outstanding shares of common stock of DL Smith, Inc. What is the return that these individuals require on this investment called? (Points : 4)
dividend yield
cost of equity
capital gains yield
cost of capital
income return

15. Jungle, Inc. has a target debt-equity ratio of 0.72. Its WACC is 11.5 percent and the tax rate is 34 percent. What is the cost of equity if the aftertax cost of debt is 5.5 percent? (Points : 4)

Expert:  Jabi replied 4 years ago.
Hello dear client,

Thank you for requesting my help, I don't think i would be able to complete these questions on time so i don't want to waste your time, i am going to leave these questions open to other available expert or you can make new thread for these questions.

Let me know, which one is suitable for you?

Customer: replied 4 years ago.
you can open it to other experts
Expert:  Jabi replied 4 years ago.
Expert:  Mr. Gregory White replied 4 years ago.
Hi, it will be a pleasure to help you with your homework today.

I am working on these for you right now. Have in a few minutes for you.
Expert:  Mr. Gregory White replied 4 years ago.

You need to spend $3 to view this post. Add Funds to your account and buy credits.
Expert:  Mr. Gregory White replied 4 years ago.

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