What is Sullivan’s corporate cost of capital? Is the cost of capital the same as the cost of debt? Why or why not?
finance
Description
Questions (Include your answers following each question.)
1. What is Sullivan’s corporate cost of
capital? Is the cost of capital the same
as the cost of debt? Why or why not?
2. Define incremental cash flow, and then
set forth the fresh papaya project’s operating cash flow statement for the
first year of operation.
3. Since the project will be financed in
part by debt, should the cash flow statement include interest expenses? Explain.
4. Should the $100,000 that was spent to
rehabilitate the plant be included in the analysis? Explain.
5. What
is Sullivan’s Year 0 investment outlay on this project? What is the expected nonoperating cash flow
when the project is terminated?
6. What
is the project’s estimated net cash flow stream?
7. What
is the project’s NPV, IRR, and modified IRR (MIRR), margin of error and
payback?
Should the project be undertaken?
For
depreciation, you first need to determine the depreciable basis of the
purchased equipment. After finding this value, you will then apply the
percentages
Depreciation:
1 yr 33%
2 yr 45%
3 yr 15%
4 yr 7%
