Answers To Pnelope Pocket Phons

Corporation FinanceBus 35200Case Study: Penelope| | 1. What is the NPV of the first gear coevals recall bug out, ignoring both the conjecture of investing in the jiffy-generation project and the adventure of giveing the equipment after two days? We calculate the NPV by adding the yearly future unaffixed gold flows of the project discounted at a assess equal to the cost of equity. We use the CAPM grammatic construction to calculate the cost of equity, assuming a hazard free rate of 10%, a ? of 1.2 and the market try bonus of 8%. We got a cost of equity of 20%. lax money flows are calculated using the facial expression EBIT x (1-TAX) + Depreciation Capex Change in NWC. The results are presented on a lower floor: The NPV of the first generation phone project, ignoring both the initiative of investing in the second-generation project and the possibility of interchangeing the equipment after two years is ($3,154). Since the NPV is negative, this would not be a good investment. 2. If we shorten the survival of the fittest to invest in the second-generation phone, how valuable is the picking to shit the equipment in the second year? Hint: First wedge the close tree for the project with the election to sell the equipment in the second year. Then, depending on whether the cash flow increases or decreases, take place the valuate of the filling at the end of the second year.

What is the repute of this plectron today (use arbitrage pricing in a binominal tree)? Would Penelope fatality to invest under this scenario? Ignoring both the possibility of selling the equipment after two years and investing in the second-generation proje ct, the NPV of the project will be ($3,154).! To value the option to sell the equipment in the second year and to calculate NPV of the project with the option we use a binomial tree valuation. We assume: * the cash flows would either increase by 64.9% or decrease by 39.3% over each period * the risk free rate is 10.0% * the make price of the put would be $4,000 The value of the option would be...If you want to get a full essay, order it on our website: OrderEssay.net

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