Assignment Questions
Assignment 3 FIN101
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Course Name: Principles of Finance |
Student’s Name: |
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Course Code: FIN101 |
Student’s ID Number: |
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Semester: 2nd |
CRN: |
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Academic Year: 1440/1441 H |
For Instructor’s Use only
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Instructor’s Name: |
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Students’ Grade: / 5 |
Level of Marks: High/Middle/Low |
Instructions:
· This Assignment must be submitted on Blackboard (WORD format only) via the allocated folder.
· Email submission will not be accepted.
· You are advised to make your work clear and well-presented; marks may be reduced for poor presentation. This includes filling your information on the cover page.
· Assignment will be evaluated through BB Safe Assign tool.
· Late submission will result in ZERO marks being awarded.
· The work should be your own, copying from students or other resources will result in ZERO marks.
· Use Times New Roman font 12 for all your answers.
Assignment Questions
Q1: Carrefour is expecting its new center to generate the following cash flows:
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Years |
0 |
1 |
2 |
3 |
4 |
5 |
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Initial Investment |
($35,000,000) |
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Net operating cash-flow |
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$6,000,000 |
$8,000,000 |
$16,000,000 |
$20,000,000 |
$30,000,000 |
a. Determine the payback for this new center. (1 mark)
b. Determine the net present value using a cost of capital of 15 percent. Should the project be accepted? (1 mark)
Answer:
Q2. What is the EAC of two projects: project A, which costs $150 and is expected to last two years, and project B, which costs $190 and is expected to last three years? The cost of capital is 12%. (1 mark)
Answer:
Q3. A company pays annual dividends of $10.40 with no possibility of it changing in the next several years. If the firm’s stock is currently selling at $80, what is the required rate of return? (1 mark)
Answer:
Q4. Stag corp has a capital structure which is based on 50% common stock, 20% preferred stock and 30% debt. The cost of common stock is 14%, the cost of preferred stock is 8% and the pre-tax cost of debt is 10%. The firm's tax rate is 40%. (1 mark)
a. Calculate the WACC of the firm.
b. The firm is considering a project that is equally as risky as the firm's current operations. This project has initial costs of $280,000 and annual cash inflows of $66,000, $320,000, and $133,000 over the next three years, respectively. What is the net present value of this project ?
Answer: