Janice Carrillo, a Gainesville, Florida, real estate developer, has devised a regression model to help determine residential
1 answer:
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Answer:
a. project A; because its NPV is about $335 more than the NPV of project B.
Explanation:
As in the question it is mentioned that the required rate of return for project A and project B is 11.25% and 10.75% respectively.
Here we have to determined the net present value for both projects having different required rate of return
So based on the net present value the first option is correct as the project A is more than the project B
Therefore the first option should be accepted
Answer:
D. 3.66%
Explanation:
For computing the after tax cost of debt we need to apply the RATE formula i.e to be shown in the attachment
Given that,
Present value = $2,120
Future value or Face value = $2,000
PMT = $2,000 × 6.6% ÷ 2 = $66.60
NPER = 18 years × 2 = 36 years
The formula is shown below:
= Rate(NPER;PMT;-PV;FV;type)
The present value come in negative
So, after solving this,
1. The pretax cost of debt is 3.05% × 2 % = 6.10%
2. And, the after tax cost of debt would be
= Pretax cost of debt × ( 1 - tax rate)
= 6.10% × ( 1 - 0.40)
= 3.66%
