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Find the NPV and PI of a project that costs $1,500 and returns $800 in Year 1 and $850 in Year 2. Assume the project’s cost of capital is 8 percent.Find the NPV and PI of an annuity that pays $500 per year for eight years and costs $2,500. Assume a discount rate of 6 percent.
    
    Answers:   
Answers:       
    Enter the answers in blue shaded cells   
Enter the answers in blue shaded cells       
    Step 1:   
Step 1:   PV of cash inflowsC  
PV of cash inflowsC  PV of cash outflows F  
PV of cash outflows F      
    Step 2:   
Step 2:   NPV C  
NPV C  PI C  
PI C      
        
The Nutrex Corporation wants to calculate its weighted average cost of capital. Its target capital structure weights are 40 percent long-term debt and 60 percent common equity. The before-tax cost of debt is estimated to be 10 percent and the company is in the 40 percent tax bracket. The current risk-free interest rate is 8 percent on Treasury bills. The expected return on the market is 13 percent and the firm’s stock beta is 1.8.   
   
   
   
a. What is Nutrex’s cost of debt?
b. Estimate Nutrex’s expected return on common equity using the security market line.                                      c. Calculate the after-tax weighted average cost of capital.		   
   
   
        
Answers:       
 Enter the answers in blue shaded cells    
        
  FormulaCalculation   
a.Cost of debtTC   
        
b.Expected return on common equity TC   
        
c.After-tax WACCTC   

 

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