orioles32
May 21, 2011, 08:34 AM
Corporation XY is a company whose sole assets are $100,000 in cash and three projects that it will undertake. The projects are risk-free and have the following cash flows.
Project A Cash Flow Today is -20,000 Cash flow in 1 year is 30,000
Project B Cash Flow Today is -10,000 Cash flow in 1 year is 25,000
Project C Cash Flow Today is -60,000 Cash flow in 1 year is 80,000
The company plans to invest any unused cash today at the risk-free interest rate of 10%. In one year, all cash will be paid to investors and the company will be shut down.
A. What is the NPV (net present value) of each project? Which projects should the company undertake and how much cash should it retain?
B. What is the total value of the company's assets ( projects and cash) today?
C. What cash flows will the investors in the company receive? Based on these cash flows, what ist he value of the company today?
PLEASE SHOW ANY WORK!
THANK YOU!
Project A Cash Flow Today is -20,000 Cash flow in 1 year is 30,000
Project B Cash Flow Today is -10,000 Cash flow in 1 year is 25,000
Project C Cash Flow Today is -60,000 Cash flow in 1 year is 80,000
The company plans to invest any unused cash today at the risk-free interest rate of 10%. In one year, all cash will be paid to investors and the company will be shut down.
A. What is the NPV (net present value) of each project? Which projects should the company undertake and how much cash should it retain?
B. What is the total value of the company's assets ( projects and cash) today?
C. What cash flows will the investors in the company receive? Based on these cash flows, what ist he value of the company today?
PLEASE SHOW ANY WORK!
THANK YOU!