The Biotek Corporation has a basic cost of capital of 15 percent and is considering investing in either or both…

The Biotek Corporation has a basic cost of capital of 15 percent and is considering investing in either or both of the following projects. Project HiTek will require an investment of \$453,000, while Project LoTek’s investment will be \$276,000.. The following after-tax cash flows (including the investment outflow in year zero) are estimated for each project.
YEAR PROJECT PROJECT

HITEK LOTEK
0 \$-453,000 \$-276,000
1 132,000 74,000
2 169,500 83,400
3 193,000 121,000
4 150,700 54,900
5 102,000 101,000
6 0 29,500
7 0 18,000
a) Determine the present value of the cash inflows for each project and then calculate their net present values by subtracting the appropriate dollar amount of capital investment. Which if either of the projects is acceptable?
b) B. Calculate the internal rates of return for Project HiTek and Project Lotek. Which project would be preferred?
c) Now assume that BioTek uses risk-adjusted discount rates to adjust for differences in risk among different investment opportunities. Biotek projects are discounted at the firm’s cost of capital of 15 percent. A risk premium of 3 percentage points is assigned to Lotek-type projects, while a 6 percentage point risk premium is used for project similar to Hitek. Determine the risk-adjusted present value of the c cash inflow for LoTek and Hitek and calculate their risk-adjusted net present values,. Should BioTek invest in either, both or neither project?

Don't use plagiarized sources. Get Your Custom Essay on
The Biotek Corporation has a basic cost of capital of 15 percent and is considering investing in either or both…
From as low as \$9/Page

How to place an order?

Take a few steps to place an order on our site:

• Fill out the form and state the deadline.
• Calculate the price of your order and pay for it with your credit card.
• When the order is placed, we select a suitable writer to complete it based on your requirements.
• Stay in contact with the writer and discuss vital details of research.
• Download a preview of the research paper. Satisfied with the outcome? Press “Approve.”

Feel secure when using our service

It's important for every customer to feel safe. Thus, at The Homework Writings, we take care of your security.

Financial security You can safely pay for your order using secure payment systems.
Personal security Any personal information about our customers is private. No other person can get access to it.
Academic security To deliver no-plagiarism samples, we use a specially-designed software to check every finished paper.
Web security This website is protected from illegal breaks. We constantly update our privacy management.

Get assistance with placing your order. Clarify any questions about our services. Contact our support team. They are available 24\7.

Still thinking about where to hire experienced authors and how to boost your grades? Place your order on our website and get help with any paper you need. We’ll meet your expectations.