Assume the cost of capital for the parent company is 9% and the cost of...
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Accounting
Assume the cost of capital for the parent company is 9% and the cost of capital for similar projects as to this new division is 10.1%. Tax Rate=35%. The company is all equity financed.
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1. What is the NWC each year?
2. What is the change in capex each year?
3. What is the FCF each year?
4. What is the payback period and the discounted payback period?
5. FOR this question only assume terminal value in year 2015=$23450, what is the IRR?
6. What is the terminal value with a 2% growth rate?
7. What is the present value of the terminal value?
8. What is the present value f the terminal value
9. What is the NPV of this project?
10. Do you accept or reject this project? Why or why not?
11. Would your answer change if the cost of capital is 11.8%. What if the cost of capital is 11.3%?
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