My Essays
19- Financing and Valuation The correct answer for each question is indicated by a . | | | | 1 | INCORRECT | | A project costs $14.7 million and is expected to produce cash flows of $4 million a year for 15 years. The opportunity cost of capital is 20%. If the firm has to issue stock to undertake the project and issue costs are $1 million, what is the project's APV? | | | | | A) | $3.7 million | | | | | | B) | $4.5 million | | | | | | C) | $4.7 million | | | | | | D) | $3.0 million | | | | | | | | 2 | INCORRECT | | The method to determine the net present value for an all equity firm | | | | | A) | Discounts the cash flows after tax by the levered equity rate | | | | | | B) | Discounts the cash flows after tax by the WACC | | | | | | C) | Discounts the earnings after tax by the unlevered equity rate | | | | | | D) | Discounts the cash flows after tax by the unlevered equity rate | | | | | | | | 3 | INCORRECT | | The APV method to value a project should be used: | | | | | A) | When the project's level of debt is known over the life of the project | | | | | | B) | When the project's target debt to value ratio is constant over the life of the project | | | | | | C) | When the project's debt financing is unknown over the life of the project | | | | | | D) | None of the above | | | | | | | | 4 | INCORRECT | | The after-tax weighted average cost of capital is determined by: | | | | | A) | Multiplying the weighted average after tax cost of debt by the weighted average cost of equity | | | | | | B) | Adding the weighted average before tax cost of debt to the weighted average cost of equity | | | | | | C) | Adding the weighted average after tax cost of debt to the weighted average cost of equity | | | | | | D) | Dividing the weighted