2011PostExam2PracticeQs_answers

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

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

View Full Document Right Arrow Icon
FINA 363 Post-Exam 2 Practice Questions Answers Capital Budgeting 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? (a) 6 : 667% (b) 7 : 500% (c) 8 : 333% (d) 9 : 000% X 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.
Background image of page 1

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

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

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 Right Arrow Icon
Ask a homework question - tutors are online