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$10- $30

F 301 Assignment 5 DUE: June 22nd 1. CF1 = 75 CF2 = 75 CF3 = 75 d = 15% FIND: Present Value (PV) 2. CF = 100 g = 0 d = 20% Assume the Cash Flow is annual and perpetual FIND: PV 3. CF0 = -100 (this is the investment) CF1 = 30 CF2 = 50 CF3 = 60 CF4 = 90 WACC = 12% FIND: Payback in Years 4. Based upon the information in #3, FIND: Net Present Value (NPV) 5. Next year’s numbers include these: EBIT = 1,000 Depreciation = 250 Taxes = 100 Net increase in Working Capital = 50 Net Increase in Capital Expenditure = 250 Long-term sustainable growth = 4% Risk free rate = 3% Beta = 1.5% Equity Risk Premium = 7% D/E = 0.333 Investment = -$10,000 (occurs at time = 0) Cost of debt (prior to tax adjustment) = 7% Corporate tax rate = 33% FIND: Net Present Value (NPV). Use CFFA for cash flow and WACC for the discount rate. 6. CF0 = -6,750 CF1 = 3,000 CF2 = 3,000 CF3 = 3,000 WACC = 14% FIND: NPV 7. RFR = 2% Beta = 1.1 ERP = 6.0% D/E = 1.0 Cost of debt prior to tax adjustment = 4% Corporate tax rate = 35% FIND: WACC 8. CF0 = -1,000 CF1 = 50 CF2 = 250 CF3 = 450 CF4 = 200 CF5 = 1,200 WACC = 8% FIND: NPV 9. Given the cash flows in the problem above, FIND the Payback, in years. 10. Given these cash flow numbers for next year: Net Income = 4,000 Interest Expense = 500 Depreciation = 800 Net increase in Working Capital = 100 Net Capital Expenditure = 900 Taxes = 1,000 Initial Investment = -25,000 (occurs at time = 0) Risk free rate = 5% Beta = 2.0 ERP = 7.5% D/E = 0.5 Cost of debt capital prior to adjustment = 6% Corporate tax rate = 35% long term stable growth = 2.5% FIND: NPV (use CFFA1 and WACC)

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