{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

# 2011PostExam2PracticeQs_answers - FINA 363 Post-Exam 2...

This preview shows pages 1–2. Sign up to view the full content.

FINA 363 Post-Exam 2 Practice Questions Answers Capital Budgeting 1. Riesling Inc. is considering a project that has the following cash °ows (Yr 0 is the initial investment. That is, the amount of initial investment is \$10 ; 000 ). If Riesling±s weighted average cost of capital (WACC) is 5% , what is the Net Present Value (NPV) of this project? Yr 0 Yr 1 Yr 2 ° 10 ; 000 +2 ; 000 +11 ; 000 (a) \$1 ; 716 : 45 (b) \$1 ; 791 : 38 (c) \$1 ; 882 : 09 X 2000 1 : 05 + 11000 (1 : 05) 2 ° 10000 (d) \$2 ; 129 : 07 (e) \$2 ; 721 : 09 2. Assume that Sangiovese Corporation has a cost of equity of 12% and a pre-tax cost debt of 4% . The current tax rate for your ²rm is 25% . Your ²rm has never issued, and does not plan to issue any preferred stocks. The Debt-Equity ratio of Sangiovese is 0 : 5 . (i.e., W d W e = 0 : 5 : ) What is the Weighted Average Cost of Capital (WACC) of Sangiovese? w d = 0 : 5 w e ; w d + w e = 1 ) w e = 2 3 ; w d = 1 3 ( There was a typo. This one is OK. WACC = 1 3 ± 4 ± (1 ° 0 : 25) + 2 3 ± 12

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

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### Page1 / 2

2011PostExam2PracticeQs_answers - FINA 363 Post-Exam 2...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online