II Moodle ot yet swered Ramco industries choose the best asst from the following two...
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II Moodle ot yet swered Ramco industries choose the best asst from the following two alternatives assets for investment purpose. The expected investment is decided to be $110 million mobilized from both debt and equity sources in equal proportions. The beta stock is 0.94, market risk premium 6% and risk free rate at 5% and tax rate applicable to the firm at 40%. Firm's pre tax arked out of 100 12% Flag question a) Determine the cost of capital applicable to evaluate the assets b) Apply NPV, IRR & Pl methods to evaluate the proposals and suggest the best one. Analyse your results Investments: Investment Year Asset-A Asset-B 0 55 110 3 55 NILI Cash Flows after Tax (CFAT) Year CFAT- Asset-A ($Million) CFAT-Asset-B $ Million 15 10 1 2. BO 18 3 45 28 4 48 48 NB: the rates should be rounded off to the nearest Whole number Rike 10.45 take 10% or f10156, take 11% and so on
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