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1 a question A project has an initial cost of $384,200 and cash inflows of 5187,636, 593
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a question A project has an initial cost of $384,200 and cash inflows of 5187,636, 593.496, 1103,802 and 992.556, for Years 1 to 4 espectady, the is the NPV of this project if the discount rate is infinite? Select one a.-5384,200 b. $128,415 c. $384,200 d. -593,290 e 593,290
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QUESTION 12 The corporate tax rate is 30% in Australia. Suppose Vodafone pays a 40% partially-franked dividend of 52 per share the franking credits per share should be a 50.60 b. $0.80. OG $0.48. O d. 50.34 Oe. None of the above. QUESTION 13 when an investor becomes more risk-adverse. On plane where return is on the y-axis and risk is on the x-axis, the indifference curves a. do not change b. are flatter care horizontal d. are steeper. e. are vertical
Expert Solution
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Solution:-
If the discount rate is infinite, then present value of any cash flow is zero today even it is in billion or in trillion. It is mathematically defined one divide by infinity leads to zero. So cash inflows become zero today, if discount rate is infinite.
So NPV will be negative equal to initial investment i.e. $ 3,84,200/- So answer is - $ 3,84,200/-
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Question 12
Franked Dividend For the Vodafone shares = 2*40% = $0.8
Fraking Credit = Franked Dividend*Tax Rate = $0.8*30% = $0.24
so the correct option is None of the above.
Question 13
d. are steeper
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