14 potential investment projects finance problems help
Subject
Business Finance
Question Description
Please answer these 14 questions, and please show your work. I found that you an find similar questions on google, but I don't understand the formulas. I would really appreciate your help.
Your firm has identified three potential investment projects. The projects and their cash flows are shown here:
PROJECT A -15 CASH FLOW TODAY (MILLIONS) 20 CASH FLOW IN ONE YEAR (MILLIONS)
PROJECT B 7 CASH FLOW TODAY (MILLIONS) $3 CASH CLOW IN ONE YEAR (MILLIONS)
PROJECT C $25 CASH FLOW TODAY (MILLIONS) -$14 CASH FLOW IN ONE YEAR (MILLIONS)
Suppose all cash flows are certain and the risk-free interest rate is 6%.
a. What is the NPV of each project?
b. If the firm can choose only one of these projects, which should it choose?
c. If the firm can choose any two of these projects, which should it choose?
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Suppose Bank One offers a risk-free interest rate of 7.5% on both savings and loans, and Bank Enn offers a risk-free interest rate of 8.0% on both savings and loans.
a. What arbitrage opportunity is available?
b. Which bank would experience a surge in the demand for loans? Which bank would receive a surge in deposits?
c. What would you expect to happen to the interest rates the two banks are offering?
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Throughout the 1990s, interest rates in Japan were lower than interest rates in the United States. As a result, many Japanese investors were tempted to borrow in Japan and invest the proceeds in the United States. Explain why this strategy does not represent an arbitrage opportunity.