ACTG 1P91 Lecture 8: ch5
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An all-equity firm is considering the following projects: |
Project | Beta | IRR | |||||
W | .65 | 9.5 | % | ||||
X | .74 | 10.7 | |||||
Y | 1.33 | 14.2 | |||||
Z | 1.44 | 17.3 | |||||
The T-bill rate is 5.3 percent, and the expected return on themarket is 12.3 percent.
If the firm's overall cost of capital were used as a hurdlerate, Project W would be____(incorrectly rejected, incorrectlyaccepted, correctly rejected, correctly accepted) , Project X wouldbe ____ ((incorrectly rejected, incorrectly accepted, correctlyrejected, correctly accepted) , Project Y would be_____(incorrectly rejected, incorrectly accepted, correctly rejected,correctly accepted) , and Project Z would be ____ (incorrectlyrejected, incorrectly accepted, correctly rejected, correctlyaccepted)
The partnershipof W, X, Y, and Z has the following balance sheet: |
Cash | $ 34,000 | Liabilities | $ 45,000 |
Other assets | 240,000 | W,capital (50% of profits and losses) | 64,000 |
X,capital (30%) | 87,000 | ||
Y,capital (10%) | 44,000 | ||
Z,capital (10%) | 34,000 | ||
Z is personallyinsolvent, and one of his creditors is considering suing thepartnership for the $9,000 that is currently due. The creditorrealizes that liquidation could result from this litigation anddoes not wish to force such an extreme action unless the creditoris reasonably sure of getting the money that is due. If thepartnership sells the other assets, how much money must it receiveto ensure that $9,000 would be available from Zâs portion of thebusiness? Liquidation expenses are expected to be $19,000.(Do not round intermediate calculations.) Minimum Amount: |