The projected sales number in year 1 is 1200 after

Info icon This preview shows pages 2–3. Sign up to view the full content.

View Full Document Right Arrow Icon
years. The projected sales number in year 1 is 1200, after which sales will grow at 2% annually. Cost of manufacturing for this project is 50% of sales. You also know that the machine is depreciated with the straight line method over the life of the project, and the project needs an additional investment in raw materials at time zero to get the production off the ground. The materials cost $200 and will need to be paid cash. Marginal corporate tax rate is 35%. Your cost of capital is 8% p.a. The project is financed 100% equity. In EXCEL: a) Using FCFF find the value of the project. b) Perform a sensitivity analysis of the project’s value to the discount rate. For full credit explain all steps. Upload your spreadsheet on Polylearn. Question 4 (20 points) 1) What is quantitative easing? Why have we seen it over the last few years and why is it possibly coming to an end? 2) What are the consequences of raising interest rates for: a) bond markets b) stock markets? Question 5 (20 points) Write down the Single Index Model equation. 1) How is it different from the CAPM equation? 2) What is one fundamental consequence of expressing returns with SIM rather than CAPM?
Image of page 2

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

View Full Document Right Arrow Icon
3) What are the sources of return in SIM? 4) Why was SIM developed in response to CAPM?
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern