Question: Short Form Situations: Situation – I: Consider That Xerox Inc., Is Reviewing Project Alpha That Has An Up-front Cost Of USD 1 Million, Whereas Project Delta Has An Up-front Cost Of Only USD 200,000. Both Projects Last Five Years And Provide Positive Cash Flows In Years 1-5. Project Alpha Is Riskier; Its Risk-adjusted WACC Is 12 Percent. Project Delta …

businessfinancefinance questions and answersShort Form Situations: Situation – I: Consider That Xerox Inc., Is Reviewing Project Alpha …Question: Short Form Situations: Situation – I: Consider That Xerox Inc., Is Reviewing Project Alpha That Has An Up-front Cost Of USD 1 Million, Whereas Project Delta Has An Up-front Cost Of Only USD 200,000. Both Projects Last Five Years And Provide Positive Cash Flows In Years 1-5. Project Alpha Is Riskier; Its Risk-adjusted WACC Is 12 Percent. Project Delta …This problem has been solved!See the answerShort Form Situations:
Situation – I: Consider that Xerox Inc., is
reviewing project Alpha that has an up-front cost of USD 1 million,
whereas project Delta has an up-front cost of only USD 200,000.
Both projects last five years and provide positive cash flows in
Years 1-5. Project Alpha is riskier; its risk-adjusted WACC is 12
percent. Project Delta is safer; its risk-adjusted WACC is 8
percent. After discounting each of the project’s cash flows at the
project’s risk-adjusted WACC, you find that Project Alpha has a NPV
of $20,000, and Project Delta has a NPV of $15,000. The projects
are mutually exclusive and cannot be repeated. The firm is not
capital constrained; it can raise as much capital as it needs,
provided it has profitable projects in which to invest. Given this
information, which Project should the company choose? Explain your
viewpoint.
Situation – II: Head Start Inc., had top line
sales last year of only USD 0.5 million. However, it is forecasted
that the top line will remain bullish over the next 4-year super
normal growth period and that will double each year for 4 years.
What are projected sales at the end of this period?
Situation – III: Consider that an investment
fund manager finds out that current risk-free rate, RFR=6%, whereas
return on the market KM= 10%, beta coefficient of Glaxo Pakistan,
βGLAXO = 1.2, whereas for Abbot Laboratories Pakistan, βABBOTT
=2.0. He now wishes to establish asset-pricing for both the stocks.
Using CAPM, calculate the required rate of return on both the
stocks.
Please answer FAST! Thank you
Expert Answer 1 since the company should invest the same capital in both the project and both are mutually exclusive project and the npv of both the project iview the full answer