Toddy Concrete Inc.
k = 4.2% + (11% - 4.2%) 2.4
k = 20.52%
NPV = -950,000 + 250,000 (.8297) + 400,000 (.6885) + 700,000 (.5712)
NPV = (67,308)
Year PVF
- (950,000) 1.0000 (950,000)
1 250,000 0.8297 207,434
2 400,000 0.6885 275,386
3 700,000 0.5712 399,872
(67,308) NPV
Crest's own beta
Year PVF 9.3%
- (950,000) 1.0000 (950,000)
1 250,000 0.9149 228,728
2 400,000 0.8371 334,826
3 700,000 0.7658 536,090
149,644 NPV
k = 4.2% + (11% - 4.2%) 1.3
k = 13.04%
Year PVF
- (950,000) 1.0000 (950,000)
1 250,000 0.8846 221,161
2 400,000 0.7826 313,037
Crest should reject he project, based on the
computations in which the commercial
construction shows a negative NPV of 67,000.
Crest should pursue on his own beta.
