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New project: NPV, opportunity cost, abandonment value

We are examining a new project. We expect to sell 500 units per year at $20 net cash flow a piece for the next 10 years. In other words, the annual operating cash flow is projected to be $20 x 500 = $10,000 per year. The relevant discount rate is 20%, and the initial investment is $55,000. a) What is the NPV? b) After the

Annuities Due, Number of Periods, Interest Rates, Future Values

Calculating Annuities Due You want to buy a new sports car from Muscle Motors for $32,000. The contract is in the form of a 72-month annuity due at a 7.75 percent APR (compounded monthly). Your monthly payment will be $? . (Round your answer to 2 decimal places, e.g. 32.16.) Calculating the Number of Periods At 12 perce

Finance: Risk premium, Magnolia beta, nominal rate of interest, EAC, NPV,

10.33 The risk-free rate is 7.6 percent. Potpourri Inc. stock has a beta of 1.7 and an expected return of 16.7 percent. Assume the capital-asset-pricing model holds. 1. What is the expected market risk premium? 2. Magnolia Industries stock has a beta of 0.8. What is the expected return on the Magnolia stock? 3. Suppose you

Multiple Choice - Time Value of Money

1. What is the value of a share of a firm's stock when the firm is expected to pay $2.80 per share dividend at the end of each year and the annual discount rate is 7.5 percent? 2. What is the present value of a lease on a warehouse, where the tenants have a lease that goes into perpetuity and have agreed to pay $300 at the en

Monthly Loan Payments

Tim Smith is shopping for a used car. He has found one priced at $4,500. The dealer has told Tim that if he can come up with a down payment of $500, the dealer will finance the balance of the price at a 12% annual rate over 2 years (24 months). 1. Assuming that Tim accepts the dealer's offer, what will his monthly (end-of-mon

Settlement options for wrongful death of Allison Boone, M.D.

Case Allison Boone, M.D. Allison Boone had been practicing medicine for seven years. Her specialty was neurology. She had received her bachelor's degree in chemistry from Kent State University and her M.D. from Washington University in St. Louis. She did her residency at Columbia Presbyterian Hospital in New York. Allison

PV calculations: single cash flow, mixed stream, FV, annuities, EBIT, leverage

See attached file. P4-4 For each of the cases shown in the following table, calculate the future value of the single cash flow deposited today that will be available at the end of the deposit period if the interest is compounded annually at the rate specified over the given period. Case Signgle Cash Flow Intere

Calculate growth rates, future value, present value, amortization

Five questions: Please explain the answers. 2. Last year Toto Corporation's sales were $225 million. If sales grow at 6% per year, how large (in millions) will they be 5 years later? 3. Ten years ago, Levin Inc. earned $0.50 per share. Its earnings this year were $2.20. What was the growth rate in Levin's earnings per s

Interest Rate, Values, and Business Organizational Forms

1. You have just taken out a 10-year, $12,000 loan to purchase a new car. This loan is to be repaid in 120 equal end-of-month installments. If each of the monthly installments is $150, what is the effective annual interest rate on this car loan? a. 6.5431 B. 7.8942 C. 8.6892 D. 8.8869 E. 9.0438 2. Describe the o

Your grandfather gives you three options for an inheritance. Which is best?

Your grandfather wants to award to you the portion of his estate allocated to you as an inheritance. He gives you three options to receive your cash: 1) $5,000 today; 2) $1,000 per year for the next eight years; or 3) $12,000 at the end of eight years. The intermediate-term money market is currently paying 11%. Which inherit

Determine the life cycle costs of the MM and GTG systems

Please see the attachment. Financial Analysis You are a financial analyst for the fictional Evergreen School District in Washington. The Facilities Department has proposed replacement of the heating and ventilation systems in the District's twenty elementary schools. The current systems have reached the end of their usefu

How many years to reach a $10,000 goal at $1250 per year

You need to accumulate $10,000. To do so you plan to make deposits of $1250 per year, with the first payment being made a year from today in a bank account that pays 12 percent interest. Your last deposit will be less than $1250 if less is need to round out to $10,000. How many years will it take you to reach your $10,000 goa

Future Value of Annuities: Ordinary Annuity and Annuity Due

Find the future value of the following annuities. The first payment in these annuities is made at the end of year one. That is, they are are ordinary annuities. A) $400 per years for 10 years at 10% B) $200 per year for 5 years at 5% C) $400 per year for 5 years at 5% D) Now rework parts a and b and c assuming that pay

Compound and Accumulate Interest on Investments

5-1A. (Compound interest) To what amount will the following investments accumulate? a. $5,000 invested for 10 years at 10 percent compounded annually b. $8,000 invested for 7 years at 8 percent compounded annually c. $775 invested for 12 years at 12 percent compounded annually d. $21,000 invested for 5 years at 5 percent com

Financial Analysis

Please review the attached document and answer all questions with explanations. Please provide as much detail as possible about each answer. Please review the attached document and answer all questions with explanations. Please provide as much detail as possible about each answer. 1. Proper risk-return management means

Financial Management

1. Raybac is about to go public. Its present stockholders own 5000,000 shares. The new public issue will represent 800,000 shares. The shares will be priced at $25 to the public with a 4% spread. The out-of-pocket costs will be $450,000. What are the net proceeds to the firm? $18,750,000 $19,200,000 $18,250,

Ali Shah sets aside 2,000 each year for 5 years.

Ali Shah sets aside 2,000 each year for 5 years. He then withdraws the funds on an equal annual basis for the next 4 years. If Ali wishes to determine the amount of the annuity to be withdrawn each year, he should use following two tables in this order: a) present value of an annuity of $1; future value of an annuity of $1

Comparing machines with unequal lives

Vandalay Industries is considering the purchase of a new machine for the production of latex. Machine A costs $2,310,000 and will last for 4 years. Variable costs are 37 percent of sales and fixed costs are $157,000 per year. Machine B costs $4,520,000 and will last for 8 years. Variable costs for this machine are 32 percent of

Comparing Mutually Exclusive Projects: Equivalent Annual Cost (EAC)

Question: Eads Industrial Systems Company (EISC) is trying to decide between two different conveyor belt systems. System A costs $456,000, has a 3-year life, and requires $150,000 in pretax annual operating costs. System B costs $521,000, has a 5-year life, and requires $83,000 in pretax annual operating costs. Both systems are

A Survey of Multiple Choice and True/False Questions Related to Business

1. Two companies are contemplating a merger. In the new entity is expected to require an initial investment of $20 million which will then result in expense savings of $2.7 million for 15 years. The weighted average cost of capital is 8%. The firm just issued bonds at 6.5%. The company would expect the following financial result

Choice between four retirement annuities - Jill Chew

P3-41. Jill Chew wishes to choose the best of four immediate retirement annuities available to her. In each case, in exchange for paying a single premium today, she will receive equal annual end-of-year cash benefits for a specified number of years. She considers the annuities to be equally risky and is not concerned about their

Equivalent Annual Cost: The Oklahoma Electric Company (OEC) is currently evaluating two different options to control the emissions from their coal-burning electric generation facility in Dewar.

The Oklahoma Electric Company (OEC) is currently evaluating two different options to control the emissions from their coal-burning electric generation facility in Dewar. A filtration system will cost $12 million to install and $700,000 per year to operate. The filtration system, which will have a salvage value of zero at the end

Fisher Effect, Time Value of Money

Please see the attached file. 1) Fisher Effect Year Expected rate of inflation Observed rate of inflation Expected real interest rate 2008 5% XX 1.5% 2007 4% 3.5% 3% a. Define the Fisher Effect and explain why expected inflation should have an impact on the nominal rate of interest? b. Today is January 1, 2008. What