This Assignment must be submitted on Blackboard (WORD format only) via the allocated folder.Email submission will not be accepted.You are advised to make your work clear and well-presented; marks may be reduced for poor presentation. This includes filling your information on the cover page.Assignment will be evaluated through BB Safe Assign tool.Late submission will result in ZERO marks being awarded.The work should be your own, copying from students or other resources will result in ZERO marks.Use Times New Roman font 12 for all your answers.Assignment 3 FIN101
Course Name: Principles of Finance
Student’s Name:
Course Code: FIN101
Student’s ID Number:
Semester: 2nd
CRN:
Academic Year: 1440/1441 H
For Instructor’s Use only
Instructor’s Name:
Students’ Grade:
/5
Level of Marks: High/Middle/Low
Instructions:
➢
This Assignment must be submitted on Blackboard (WORD format only)
via the allocated folder.
➢
Email submission will not be accepted.
➢
You are advised to make your work clear and well-presented; marks may be
reduced for poor presentation. This includes filling your information on
the cover page.
➢
Assignment will be evaluated through BB Safe Assign tool.
➢
Late submission will result in ZERO marks being awarded.
➢
The work should be your own, copying from students or other resources will
result in ZERO marks.
➢
Use Times New Roman font 12 for all your answers.
Assignment Questions
Q1: Carrefour is expecting its new center to generate the following cash flows:
Years
Initial
Investment
Net operating cashflow
0
1
2
3
4
5
($35,000,000)
$6,000,000 $8,000,000 $16,000,000 $20,000,000 $30,000,000
a. Determine the payback for this new center. (1 mark)
b. Determine the net present value using a cost of capital of 15 percent. Should the project be
accepted? (1 mark)
Answer:
Q2. What is the EAC of two projects: project A, which costs $150 and is expected to last two
years, and project B, which costs $190 and is expected to last three years? The cost of capital
is 12%. (1 mark)
Answer:
Q3. A company pays annual dividends of $10.40 with no possibility of it changing in the
next several years. If the firm’s stock is currently selling at $80, what is the required rate of
return? (1 mark)
Answer:
Q4. Stag corp has a capital structure which is based on 50% common stock, 20% preferred
stock and 30% debt. The cost of common stock is 14%, the cost of preferred stock is 8% and
the pre-tax cost of debt is 10%. The firm’s tax rate is 40%. (1 mark)
a. Calculate the WACC of the firm.
b. The firm is considering a project that is equally as risky as the firm’s current
operations. This project has initial costs of $280,000 and annual cash inflows of
$66,000, $320,000, and $133,000 over the next three years, respectively. What is
the net present value of this project ?
Answer:
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