fin-theo-108-期中作業m1 (1).pdf - 財務理論(財金研一-期中作業(Take home 申論與計算題:(每題各12.5 1 Suppose your production

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1 財務理論 ( 財金研一 )--- 期中作業 (Take home) 申論與計算題: ( 每題各 12.5%) 1. Suppose your production Opportunity set in a word of perfect certainty consists of the following possibilities: Project Investment Outlay Rate of Return (%) A $1,000,000 8 B $1,000,000 20 C $2,000,000 4 D $3,000,000 30 (1) Graph the production opportunity set in a 0 C , 1 C framework. (2) If the market rate of return is 10%, draw in the capital market line for the optimal investment decision. 2. The Roberts Company has cash inflows of $140,000 per year on project A and cash outflows of $100,000 per year. The investment outlay on the project is $100,000. Its life is 10 years. The tax rate, c , is 40%. The opportunity cost of capital is 12%. (1) Present two alternative formulations of the net cash flows adjusted for the depreciation tax shelter. (2) Calculate the net present value for project A, using straight-line depreciation for tax purposes. 3. A small businesswoman faces a 10% chance of having a fire that will reduce her net worth to $1, at 10% chance that fire will reduce it to $50,000, and an 80% chance that nothing detrimental will happen, so that her business will retain its worth of $100,000.
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