corporate finance

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Joined: Fri Dec 11, 2015 7:22 am

corporate finance

Postby gitimamishra01 » Sat Dec 26, 2015 1:56 pm

I have doubts regarding the following questions in QUIZ 5 of Corporate Finance :
Q7- the answer by the formula comes out to be 28.05%
Q9 - won't A has greater NP when Project A has a IRR of 20 % and Project B has a IRR of 15%
Q11 - In the answer given ratios are taken and not the days, hence would'nt the answer change?
Q13 - Would'nt the answer be 17.22%
Q14 - The answer and question doesn't match

Please reply as soon as possible

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Re: corporate finance

Postby edupristine » Wed Dec 30, 2015 1:35 pm

Ques 7: Yes the answer will be 28.05%.
[1+(0.03/(1-0.03))(365/(60-15)) – 1 = 28.05%.

Ques 9: We are sorry. Information is insufficient. Both project has +ve NPV but we cannot tell which one is greater because of insufficiency of information.

Ques 11: Sorry the framing of the question is wrong. Days shall be there in place of ratios.

Ques 13: Yes, the answer will be 17.22%.
[D0*(1+g)/ P0] +g
{$5*[(1+7%)/52.35]} + 7%= 17.22%

Ques 14: Shaun Wright is a analyst at Workfield Inc. He passes 2 observations Winfra a company he is analysing.
Statement 1: . When analyst can estimate the target capital structure , it should be used to calculate the WACC and not the existing capital structure.
Statement 2: The firm is observed to be decreasing its debt exposure over the years and hence it is correct in reducing the weight of debt.
Answer will be C. Both statements are correct.

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