Hendrickson Industries is considering the following independent projects for the coming year: Project RequiredInvestment ExpectedRate of Return Risk X $8 million 13.5% High Y   4 million 10.0% Average Z   3 million   7.5% Low Hendrickson’s WACC is 10.5 percent, but it adjusts for risk by adding 2 percent to the WACC for high-risk projects and subtracting 2 percent for low-risk projects.  Which project(s) should Hendrickson accept assuming it faces no capital constraints?

A firm with a 12.5 percent cost of capital is considering a project for this year’s capital budget.  The project’s expected after-tax cash flows are as follows: Year: 0 1 2 3 4 Cash flow: -$8,000 $3,700 $3,800 $3,900 $2,500 Calculate the project’s payback period.

A firm with a 12.5 percent cost of capital is considering a project for this year’s capital budget.  The project’s expected after-tax cash flows are as follows: Year: 0 1 2 3 4 Cash flow: -$6,000 $2,500 $2,900 $2,800 $2,100 Calculate the project’s payback period.

A firm with a 12 percent cost of capital is considering a project for this year’s capital budget.  The project’s expected after-tax cash flows are as follows: Year: 0 1 2 3 4 Cash flow: -$5,000 $2,200 $2,300 $2,300 $1,700 Calculate the project’s discounted payback period.

A firm with a 9.5 percent cost of capital is considering a project for this year’s capital budget.  The project’s expected after-tax cash flows are as follows: Year: 0 1 2 3 4 Cash flow: -$6,000 $2,800 $2,700 $2,200 $2,900 Calculate the project’s internal rate of return (IRR).

A firm with a 13.5 percent cost of capital is evaluating two projects for this year’s capital budget.  The projects’ expected after-tax cash flows are as follows: Year: 0 1 2 3 Project X: -$6,000 $3,300 $2,200 $3,200 Project Y: -$4,000 $1,800 $2,200 $2,100 If Projects X and Y are mutually exclusive, which one(s) should the firm adopt?

Corbett Manufacturing can invest in one of two mutually exclusive machines that will make a product it needs for the next 6 years.  Machine J costs $14 million but realizes after-tax inflows of $6.8 million per year for 3 years, after which it must be replaced.  Machine K costs $25 million and realizes after-tax inflows of $7.3 million per year for 6 years.  Based on the firm’s cost of capital of 12 percent, the NPV of Machine K is $5,013,273, with an equivalent annual annuity (EAA) of $1,219,357 per year.  Calculate the EAA of Machine J. Compare your result to that of Machine K and decide which to recommend.

As a member of UA Corporation’s financial staff, you must estimate the Year 1 operating cash flow for a proposed project with the following data. What is the Year 1 operating cash flow?   Sales revenues, each year $42,500 Depreciation $10,000 Other operating costs $17,000 Interest expense $  4,000 Tax rate 35.0%    

A firm with a 13.5 percent cost of capital is evaluating two projects for this year’s capital budget.  The projects’ expected after-tax cash flows are as follows: Year: 0 1 2 3 Project X: -$10,000 $3,100 $5,400 $5,300 Project Y: -$5,000 $2,500 $1,900 $2,700 If Projects X and Y are mutually exclusive, which one(s) should the firm adopt?

The Bettencourt Company’s currently outstanding bonds have a 12.2 percent coupon and a 6.9 percent yield to maturity.  Bettencourt believes it could issue new bonds that would provide a similar yield to maturity.  If its marginal tax rate is 30 percent, what is Bettencourt’s after-tax cost of debt?