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- Singh Development Co. is deciding whether to proceed with Project X.The cost would be $11 million in Year 0. There is a 50% chance that X would be hugelysuccessful and would generate annual after-tax cash flows of $7 million per year duringYears 1, 2, and 3. However, there is a 50% chance that X would be less successful and wouldgenerate only $1 million per year for the 3 years. If Project X is hugely successful, it wouldopen the door to another investment, Project Y, which would require an outlay of $8 millionat the end of Year 2. Project Y would then be sold to another company at a price of$16 million at the end of Year 3. Singh’s WACC is 9%.a. If the company does not consider real options, what is Project X’s expected NPV?b. What is X’s expected NPV with the growth option?c. What is the value of the growth option?martin development company is deciding whether to proceed with Project X. The cost would be $9 million in year 0, there is a 50% chance that X would be hugely successful and would generate a cash after tax flow of $6 million per year during years 1, 2 and three. however there is a 50% chance that X would be less successful and would generate only $1 million per year for the three years. If Project X is hugely successful it would open the door to another investment project why which would require an outlay of 10 million dollars at the end of year 2. project Y would then be sold to another company at a price of $20 million at the end of year 3 Martins weighted average cost of capital is 11%. A)if the company does not consider real options what is Project X expected NPV? b) What is X is expected NPV with the growth option? c)what is the value of the growth option?9. Chrustuba Inc. is evaluating a new project that would cost $8.0 million at t=0. There is a 50% chance that the project would be highly successful and generate annual after-tax cash flows of $5.4 million during Years 1, 2, and 3. However, there is a 50% chance that it would be less successful and would generate only $1 million for each of the 3 years. If the project is highly successful, it would open the door for another investment of $10 million at the end of Year 2, and this new investment could be sold for $20 million at the end of Year 3. Assuming a WACC of 8.5%, what is the project's expected NPV (in thousands) after taking into account this growth option? Do not round intermediate calculations. a. $3,942 b. $4,318 c. $4,506 d. $3,755 e. $3,379
- Chrustuba Inc. is evaluating a new project that would cost $8.2 million at t = 0. There is a 50% chance that the project would be highly successful and generate annual after-tax cash flows of $6.2 million during Years 1, 2, and 3. However, there is a 50% chance that it would be less successful and would generate only $1 million for each of the 3 years. If the project is highly successful, it would open the door for another investment of $10 million at the end of Year 2, and this new investment could be sold for $20 million at the end of Year 3. Assuming a WACC of 10.0%, what is the project's expected NPV (in thousands) after taking this growth option into account?WorldTrans is evaluating a new project that would cost $8.2 million at t = 0. There is a 50% chance that the project would be highly successful and generate annual after-tax cash flows of $6.2 million during Years 1, 2, and 3. However, there is a 50% chance that it would be less successful and would generate only $1 million for each of the 3 years. If the project is highly successful, it would open the door for another investment of $10 million at the end of Year 2, and this new investment could be sold for $20 million at the end of Year 3. Assuming a WACC of 8.5%, what is the project's expected NPV (in thousands) after taking into account this growth option? Do not round intermediate calculations. Group of answer choices $5,720 $3,661 $4,576 $5,492 $5,034CT Inc. is evaluating a project that would cost P8 million at t = 0. There is a 50% chance that the project would be highly successful and generate annual after-tax cash flows of P6 million during Years 1, 2, and 3. However, there is a 50% chance that it would be less successful and would generate only P1 million for each of the 3 years. If the project is highly successful, it would open the door for another investment of P10 million at the end of Year 2, and this new investment could be sold for P20 million at the end of Year 3. However, if the project is unsuccessful, the new P10 million investment at the end of Year 2 would only be sold for P5,000,000 at the end of Year 3. Assume a WACC of 12.0%. Listed below are the requirements for this data set: What is the project's expected NPV if the company would not take the growth option? (Round final answer to the nearest peso) What is the project's expected NPV after taking into account this growth option? (Round final answer to the…
- ireRock Wheel Corp is evaluating a project in which there is a 40 per cent probability of revenues totaling $3 million and a 60 per cent probability of revenues totaling $1 million per year. If cash expenses will be $1.0 million while depreciation expense will be $200 000, then what is the expected free cash flow from taking the project if the company tax rate is 30 per cent?9. Chrustuba Inc. is evaluating a new project that would cost $8.0 million at t= 0. There is a 50% chance that the project would be highly successful and generate annual after-tax cash flows of $5.4 million during Years 1, 2, and 3. However, there is a 50% chance that it would be less successful and would generate only S1 million for each of the 3 years. If the project is highly successful, it would open the door for another investment of Ss10 million at the end of Year 2, and this new investment could be sold for $20 million at the end of Year 3. Assuming a WACC of 8.5%, what is the project's expected NPV (in thousands) after taking into account this growth option? Do not round intermediate calculations. a. $3,942 b. $4,318 c. $4,506 d. S3,755 e. $3,379 10. Games Unlimited Inc. is considering a new game that would require an investment of $21.0 million. If the new game is well received, then the project would produce cash flows of $9.5 million a year for 3 years. However, if the…Consider a project with free cash flow in one year of $139,138 or $187,005, with either outcome being equally likely. The initial investment required for the project is $110,000, and the project's cost of capital is 23%. The risk-free interest rate is 7%. (Assume no taxes or distress costs.) a. What is the NPV of this project? b. Suppose that to raise the funds for the initial investment, the project is sold to investors as an all-equity firm. The equity holders will receive the cash flows of the project in one year. How much money can be raised in this way that is, what is the initial market value of the unlevered equity? c. Suppose the initial $110,000 is instead raised by borrowing at the risk-free interest rate. What are the cash flows of the levered equity, and what is its initial value according to M&M? a. What is the NPV of this project? The NPV is $ 22578. (Round to the nearest dollar.) b. Suppose that to raise the funds for the initial investment, the project is sold to…
- Trovato Corporation is considering a project that would require an investment of $65,000. No other cash outflows would be involved. The present value of the cash inflows would be $83,200. The profitability index of the project is closest to (Ignore income taxes.): Multiple Choice 0.72 0.28 1.28 0.22JBL Inc. is considering a new product that would require an after-tax investment of $1,400,000 at t = 0. If the new product is well received, then the project would produce after-tax cash flows of $ 650,000 at the end of each of the next 3 years (t = 1, 2, 3), but if the market did not like the product, then the cash flows would be only $100,000 per year. There is a 70% probability that the market will be good. JBL Inc. could delay the project for a year while it conducted a test to determine if demand would be strong or weak. The project's cost and expected annual cash flows are the same whether the project is delayed or not; however, the timing of the cash flows would change. (There would be the same number of cash flows-only the cash flows would be extended out one extra year.) The project's WACC is 10%. What is the value of the project after considering the investment timing option? a. $108, 226.89 b. $ 137, 743.32 c. $167, 259.75 d. $196, 776.18 e. $216, 453.79Consider a hypothetical economy that has NO tax.ABC Ltd. is considering investing in a 2-year project which is expected to generate the followingyear-end cash flows: C1 = $110 million, C2 = $115 million. The yearly discount rate for the projectis 10%. The initial cost of the project is $200 million.(a) Compute the profit and NPV of the project. (b) Based on the answer of part (a), should the project be accepted? Explain.(c) ABC’s cut-off period is 2 years. Compute the PI and Payback of the project. Based on thesetwo methods, should ABC accept the project?(d) Write down the numerical formula for computing the IRR of this project. What is theminimum IRR value that would make this project acceptable? Explain. (e) Given the recommendations based on the four decision rules above, which project shouldABC Ltd. accept? (f) Now suppose that of the $200m initial expenditure, $50m was used for the purchase of amachine that has an estimated economic life of four years. The machine will be…