Problems

К оглавлению1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 
17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 
34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 
51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 
68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 
85 86 87 88 89 90 91 92 93 94 95 96 97 

Skill-Building Problems.

1. A firm has the opportunity to do a one-shot project. It requires a date 0 initial outlay for new

investment of $250,000. During the initial five-years, it will generate the following before-tax

cash flows: date 1 = $380,000, date 2 = $430,000, date 3 = $520,000, date 4 = $460,000, date 5

= $280,000, and $120,000 each year thereafter. The project’s tax rate is 36.0%, it’s unlevered cost

of capital is 11.6%, and the riskfree rate (= cost of debt) is 3.7%. The company has precommitted

to a particular quantity of debt on the following dates to support this project: date 0 = $130,000,

date 1 = $220,000, date 2 = $270,000, date 3 = $240,000, date 4 = $150,000, and $70,000 each

year thereafter. What is the project’s NPV as calculated using the APV method? What is the

present value of future cash flows to both debt and equity?

2. Given the same firm and same project as problem 1, calculate the project’s NPV using the Flows

To Equity method. Compare this result to the APV result. On each date, calculate the present

value of future cash flows to both debt and equity. Verify that this result is the same as the APV

case.

3. Given the same firm and same project as problem 1 and 2, calculate the project’s NPV using the

Weighted Average Cost of Capital method. Compare this result to the APV and FTE results. On

each date, calculate the present value of future cash flows to both debt and equity. Verify that this

result is the same as the APV and FTE cases.

Live In-class Problems.

4. Given the partial Adjusted Present Value spreadsheet ThreeapZ.xls, do steps 5 Tax Shield and 6

Present Value of Future Tax Shield and the first part of step 7 NPV of the Project and PV of

Future Cash Flows.

5. Given the partial Flows To Equity spreadsheet ThreeftZ.xls, do steps 5 Present Value of Future

FTE and the first two parts of step 6 Initial Outlay from Shareholders, NPV of the Project,

and PV of Future Cash Flows.

6. Given the partial Weighted Average Cost of Capital spreadsheet ThreewaZ.xls, do steps 2

Equity and Debt Weights and 3 WACC.

Skill-Building Problems.

1. A firm has the opportunity to do a one-shot project. It requires a date 0 initial outlay for new

investment of $250,000. During the initial five-years, it will generate the following before-tax

cash flows: date 1 = $380,000, date 2 = $430,000, date 3 = $520,000, date 4 = $460,000, date 5

= $280,000, and $120,000 each year thereafter. The project’s tax rate is 36.0%, it’s unlevered cost

of capital is 11.6%, and the riskfree rate (= cost of debt) is 3.7%. The company has precommitted

to a particular quantity of debt on the following dates to support this project: date 0 = $130,000,

date 1 = $220,000, date 2 = $270,000, date 3 = $240,000, date 4 = $150,000, and $70,000 each

year thereafter. What is the project’s NPV as calculated using the APV method? What is the

present value of future cash flows to both debt and equity?

2. Given the same firm and same project as problem 1, calculate the project’s NPV using the Flows

To Equity method. Compare this result to the APV result. On each date, calculate the present

value of future cash flows to both debt and equity. Verify that this result is the same as the APV

case.

3. Given the same firm and same project as problem 1 and 2, calculate the project’s NPV using the

Weighted Average Cost of Capital method. Compare this result to the APV and FTE results. On

each date, calculate the present value of future cash flows to both debt and equity. Verify that this

result is the same as the APV and FTE cases.

Live In-class Problems.

4. Given the partial Adjusted Present Value spreadsheet ThreeapZ.xls, do steps 5 Tax Shield and 6

Present Value of Future Tax Shield and the first part of step 7 NPV of the Project and PV of

Future Cash Flows.

5. Given the partial Flows To Equity spreadsheet ThreeftZ.xls, do steps 5 Present Value of Future

FTE and the first two parts of step 6 Initial Outlay from Shareholders, NPV of the Project,

and PV of Future Cash Flows.

6. Given the partial Weighted Average Cost of Capital spreadsheet ThreewaZ.xls, do steps 2

Equity and Debt Weights and 3 WACC.