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Finance capital budgeting

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1. In March 2005, General Electric (GE) has a book value of equity of $113 billion. 10.6 billion shares outstanding, and a market price of $36 per share. GE also had a cash of $13 billion and total debt of $370 billion. 1. What was GE’s market capitalization? What was GE’s market-to-book ration? 2. What was GE’s book debt-equity ratio? What was GE’s market debt-equity ration? 3. What was GE’s enterprise value? (Points :15) 2. Your firm has identified three potential investment priorities. The projects and their cash flows are shown here: Project Cash flow today ($) Cash flow in one year ($) A -10 20 B 5 5 C 20 -10 Suppose all cash flows are certain and the risk-free interest rate is 10% 1. What is the NPV of each project 2. If the firm can choose only one of these projects, which should it choose? 3. If the firm can choose any two of these projects, which should it choose? (Points :10)

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