Part 1.
What is the net present value of the project based on the
information below?
- Initial investment (Year 0): $20,000
- Year 1 cash flow: $5,000
- Year 2 cash flow: $8,000
- Year 3 cash flow: $12,000
- Required rate of return: 8%
Part 2. What is the cost of equity using the Capital Asset
Pricing Model (CAPM) if the risk-free rate is 8.6%, the beta is 0.9,
and the equity risk premium is 5%?
Part 3.
A company has annual sales of $32,000 and accounts receivables
of $2,200. The gross profit margin is 31.3%.
Part 4. Which of the following changes would NOT cause the
operating profit ratio to decline?
- Increase in material cost
- Increase in interest rate
- Decrease in selling price
- Increase in research and development expenses