Q-1 Use the net present value -NPV- method of capital budgeting to evaluate the followingproject. Should the company accept/reject the project? Why?
Initial outlay (cash outflows)
-40000
Cash inflow
Total Debt
Year 1: $20000
Year 2: $15000
Year 3: $6200
$300000
Cost of debt
7%
Total equity
$500000
Cost of
equity
12%
Q-2 Use the information shown in the table
Economic Condition
Weak
Moderate
Good
Outcome
180
260
340
Probability of outcome
.3
.5
.2
1.1 what is the expected value?
1.2 calculate the variance.
1.3 calculate the standard deviation.
1.4 calculate the coefficient of variation.
Q-3 what is Beta? Calculate the Beta for Extra and SADAFCO companies. Explain your answer
carefully? Which company’s stock is riskier?
Q4- use a line graph to show the stock price for SABIC and SADAFCO with the market index “5
years” then describe the graph and what is your conclusion. In the conclusion, give your opinion
about the correlation and how the company move in comparison to the market index? If they move
together why and if they move inconsistently why? Think about the volatility and beta. In addition,
is it good to invest in both companies to diversify?
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