Quiz5Solution - Quiz #5 Solutions: Module 3, Chapters 10-12...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Quiz #5 Solutions: Module 3, Chapters 10-12 FIN 5405 J. Houston 1. Externalities Answer: b 2. NPV (uneven cash flows; 4 years) Answer: e WACC: 10.00% 0 1 2 3 4 Cash flows -$1,000 $400 $405 $410 $415 Answer: NPV $289.84 WACC: 10.0% 3. Payback (nonconstant cash flows; 5 years) Answer: e 0 1 2 3 4 5 Cash flows -$1,000 $300 $310 $320 $330 $340 Answer: Cumulative CF -$1,000 -$700 -$390 -$70 $260 $600 Payback = 3.21 - - - - 3.21 - 4. Component cost of debt Answer: a Coupon rate 8.00% Periods/year 4 Maturity (yr) 25 Bond price $900.90 Par value $1,000 Tax rate 40% Calculator inputs: N 100 PV -$900.90 PMT $20 FV $1,000 I/YR 2.25% times 4 = 9.0% = Before-tax cost of debt 5.40% = After-tax cost of debt (A-T r d ) for use in WACC 5. Capital components Answer: e
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
6. MIRR (uneven cash flows; 3 years) Answer: e WACC: 10.00% 0 1 2 3 Cash flows -$1,000 $350 $370 $390 Answer: TV: Compounded values: $423.50 $407.00 $390.00 $1,220.50 MIRR = 6.87% found as discount rate that equates PV of TV to cost MIRR = 6.87% Alternative calculation, with Excel
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 12/30/2010 for the course FIN 5405 taught by Professor Tapley during the Spring '08 term at University of Florida.

Page1 / 4

Quiz5Solution - Quiz #5 Solutions: Module 3, Chapters 10-12...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online