Question: 1 a firm is considering the following independent projects the...
1. A firm is considering the following independent projects. The total amount of capital available for investment is $377.
|Project||Investment|| Present value of
future cash flows
Which projects should the firm accept?
2. To what should your realised return from a share be compared in order to determine whether it was a worthwhile investment?
Project Beta is a 7-year project which requires an initial outlay of $5,000. This outlay will be depreciated using straight-line depreciation over the life of the project. It will generate incremental revenue of $2000 per year and incremental costs (excluding depreciation) of $400. The tax rate is 30%.
What is the project's annual after-tax incremental earnings?