Purchase Solution

Xia Corporation (NPV and total value of assets)

Not what you're looking for?

Ask Custom Question

Can you help me get started with this assignment?

Xia Corporation is a company whose sole assets are $100,000 in cash and three projects that it will undertake. The projects are risk-free and have the following cash flows:

Project Cash Flow Today ($) Cash Flow in One Year ($)
A -20,000 30,000
B -10,000 25,000
C -60,000 80,000

Xia plans to invest any unused cash today at the risk-free interest rate of 10%. In one year, all cash will be paid to investors and the company will be shut down.

a. What is the NPV of each project? Which projects should Xia undertake and how much cash should it retain?
b. What is the total value of Xia's assets (projects and cash) today?
c. What cash flows will the investors in Xia receive? Based on these cash flows, what is the value of Xia today?

Purchase this Solution
Solution Summary

The solution explains the calculation of NPV and the total value of assets

Purchase this Solution
Free BrainMass Quizzes
Marketing Research and Forecasting

The following quiz will assess your ability to identify steps in the marketing research process. Understanding this information will provide fundamental knowledge related to marketing research.

Understanding the Accounting Equation

These 10 questions help a new student of accounting to understand the basic premise of accounting and how it is applied to the business world.

Situational Leadership

This quiz will help you better understand Situational Leadership and its theories.

Social Media: Pinterest

This quiz introduces basic concepts of Pinterest social media

Organizational Behavior (OB)

The organizational behavior (OB) quiz will help you better understand organizational behavior through the lens of managers including workforce diversity.

View More Free Quizzes
Related BrainMass Solutions

  • Diversifying operations

    What is the NPV of this investment? The NPV of the project is the new market value of the firm minus the current market value of the NPV $ -120,283.02 c.  Does dilution take place? Yes.

  • External Financing / Net Present Value of Project

    External funds needed = Increase in assets - increase in spontaneous liabilities - increase in retained earnings Assets increase by $300,000. This is the total requirement of funds, to invest in the assets.

  • Cranberry Corporation: Projected net income

    Assume the dividend payout ratio and profit margin remain fixed. c. Assume Cranberry Corporation is operating at full capacity and must maintain the same level of capital intensity. What will total assets be if sales increase by 10%?

  • Account classification; Income Statement; NPV; and Ratios

    272944 Account classification; Income Statement; NPV; and Ratios 4-50.

  • Capital Projects for Target Corp.

    Increase in working capital 20,000$ Life of the project is 20 years Depreciation with straight line method Scrap value 20,000$ Net Present Value (NPV) = Present value of cash inflows-Present value of cash outflows.

  • Multiple Choice

    All of the above. All the above affect the cash flows of the project and so the NPV of the project. 8.

  • Finance Questions

    If the focus is on the total value of the firm, the value of stock or bonds is also the total value of the firm so the relative values of stock and bonds will change in relation to the total value of the firm.

  • Finance:Time value of money,net present value etc,

    A firm has current assets of $10,000 and current liabilities of $6,000. Cash and marketable securities total $4,000, the balance in accounts receivable is $2,000, and the book value of inventory is $4,000.

  • Calculating WACC, NPV, IRR & PV of depreciation tax shields

    518911 Calculate the WACC, NPV, IRR and PV of depreciation tax shields. A1. (Calculating the WACC) The following values apply to the Drop Corporation: rd = 7.5%, re = 13%, T = 38%, D = $100, and E = $200.

View More Related Solutions