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Finance, WACC, beta, portfolio returns etc.

1. Co. A is considering the following project. The project cost will be due one year from today and will be $100m. The company will receive $200m in revenue from the project but that will be two years from today. What is the PV of the profit on the project?

2. Co. A is about to pay a dividend of $2.00 per share. Its future EPS and dividends are expected to grow with inflation, which is forecasted at 5% per year. What is the company's stock price? The nominal cost of capital is 10%.

3. If the risk-free rate of return is 4% and the expected return on the market is 10%, calculate the expected return for Co A with a beta of 2

4. Co. A has a debt-to-firm-value ratio of 20% and an equity-to-firm-value ratio of 80%. The required rate of return on equity of Co. A is 18% while the long-term borrowing rate is 9%. Co. A's marginal tax rate is the statutory rate of 35%. Calculate its after-tax weighted average cost of capital.

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QUESTION
Co. A is considering the following project. The project cost will be due one year from today and will be $100m. The company will receive $200m in revenue from the project but that will be two years from today. What is the PV of the profit on the project?

TUTORIAL
Present value measures the intrinsic worth of a future cashflow after it has been discounted into the present.

Where,
R = the discount rate,
N = the number of years,
Future value ...

Solution Summary

The problem set deals with issues in finance: Weighted average cost of capital, beta, returns etc.

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