A firm with a 14% WACC is evaluating two projects for this year's capital budget. After- tax cash flows, including depreciation, are as follows: 0 1 2 3 4 5 Project A -6,000 2,000 2,000 2,000 2,000 2,000 Project B -18,000 5,600 5
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3. Dean Thomas runs a copy shop. Recent growth in the business means that an additional photocopying machine is needed. Dean has learned that he can rent a machine for $8,000/year plus 0.3 cents for each copy made. The rental payments are due each year on the last day of the year. Or, Dean can buy a copy machine for $40,000, to
Deer Valley Lodge, a ski resort in the Wasatch Mountains of Utah, has plans to eventually add five new chairlifts. Suppose that one lift costs $2 million, and preparing the slope and installing the lift costs another $1.3 million. The lift will allow 300 additional skiers on the slopes, but there are only 40 days a year when the
Project S Costs = $15,000 Cash Flow = $4500 per year for 5 years WACC = 14% Mutually exclusive Project L Costs = $37,500 Cash Flow = $11,100 per year for 5 years WACC = 14% Which project should be selected?
Need help answering question cannot figure out where to start. Cost of debt and preferred stock 1. Franklin Mining has 15 yr, 8% annual coupon bond outstanding. Bond has a current market price of $885.54 and a face value of $1,000. If Franklin's marginal tax rate is 35% what is its relevant after-tax component cost of debt
Superior Manufacturing is thinking of launching a new product. The company expects to sell $950,000 of the new product in the first year and $1,500,000 each year thereafter. Direct costs including labor and materials will be 55% of sales. Indirect incremental costs are estimated at $80,000 a year. The project requires a new
? Virginia or Texas Local Government 1,600 word paper assessing that government's financial health. Describe the government's capital project, general, and proprietary funds. Analyze the budget. What are the main revenue sources? Describe the budgetary levels. Are items budgeted at the department level, program level,
Lehigh Co. established a subsidiary in Switzerland that was performing below the cash flow projections developed before the subsidiary was established. Lehigh anticipated that future cash flows would also be lower than the original cash flow projections. Consequently, Lehigh decided to inform several potential acquiring firms of
The Leo Lip Company is considering opening a new store location that would be available for seven years until the lease expired. The project would require fixtures and equipment costing $276,000. The equipment has a 7 year useful life and estimated salvage value of 0. The equipment is considered 5 year class property of MACRS. T
One potential criticism of the net present value technique is that there is an implicit assumption that this technique assumes the intermediate cash flows of the project are reinvested at the required return. In other words, if you calculate the future value of the intermediate cash flows to the end of the project at the require
Ryno Corporation assembles cars by purchasing frames, wheels, and other parts from various suppliers. Consider the following data: - The company plans to sell 25,000 cars during each month of the year's first quarter. - A review of the accounting records disclosed a finished-goods inventory of 1,400 cars on January 1 and an ex
1. The cost of capital reflects the cost of funds A) over a short-run time period. B) at a given point in time. C) over a long-run time period. D) at current book values. 2. The ________ from the sale of a security are the funds actually received from the sale after ________, or the total costs of issuing an
The prospective founder of a new restaurant wants to determine the present value (some might call it the pre-money) of his project. The restaurant is in the development stage but hopes to "begin" operations early next year. Project cash flows from the founder's pro forma financial statements (Balance Sheets, Income Statements &
EBIT-EPS and capital structure Data-Check is considering two capital structures.The key information is shown in the following table. Assume a 40% tax rate. Use $50,000 and $60,000 for the two EBIT numbers. See the attached file.
1. Prepare a master budget including a budgeted income statement, balance sheet, cash budget, and supporting schedules for the months January through March 2008. 2. Explain why there is a need for a bank loan and what operating sources provide the cash for the repayment of the bank loan. 7B1: Prepare Master Budget Victor
Conch Republic Electronics: Conch Republic Electronics is a mid sized electronics manufacturer located in Key West, Florida. The company president is Shelley Couts, who inherited the company. When it was founded over 70 years ago, the company originally repaired radios and other household appliances. Over the years, the comp
See attached file. 1. The difference between the market value of an investment and its cost is the: Net present value Internal rate of return Payback Period Profitability Index 2. The process of valuing an investment by determining the net present value of its future cash flows is c
You're analyzing a project and have completed this info: Year...............Cash Flow 0....................$-158,000 1....................$34,500 2....................78,500 3....................92,000 Required payback period 2.5 years Required return 12% Should the proposed project be accepted based on its i
How could you assess which of the top three companies in an industry was the best managed from a financial standpoint? How could you use comparative analysis to perform a three-year trend analysis? If you combined your company with another one in a different industry segment, how could you use comparative analysis to estimate th
a. Calculate Bear's times-interest earned ratio for next year assuming the firm raises $60 Million of new debt at an interest rate of 9 percent. b. Calculate Bears times-burden covered ratio for the next year assuming annual sinking-fund payments on the new debt will equal $5 Million c. Calculate next years earnings per share assuming Bear raises the $60 Million of new debt. d. Calculate next years times-interest earned ratio, times-burden-covered ratio, and earnings per share if Bear sells $2 Million new shares at $17.00 per share instead of raising new debt. a. Find the investment's accounting rate of return and its payback period. b. Find the investment's net present value at 20 percent discount rate. c. Find the investment's profitability index at a 20 percent discount rate. d. Find the investment's internal rate of return. a. Calculate the Net Present Value of each alternative b. Calculate the internal rate of return for each alternative. d. If the company is not under capital rationing, which alternative should be chosen? Why?
1 ABC Waterhouse's free cash flow next year will be $250 million and it is widely expected to grow at a 5 percent annual rate indefinitely. The company's weighted average cost of capital is 11 percent, the market value of its liabilities is $2.5 billion, and it has 32 million shares outstanding. a. Estimate the
Before we embark upon an IT project/initiative, it is fundamental to simulate a financial return for these investments. There are two primary approaches to measuring returns: 1) total cost of ownership (TCO) or 2) return on investment (ROI). Which approach do you favor, and why?
Please write an Executive Summary for the paper provided in the attachment. The summary should be an overview of the paper in the attachment. * The summery should be no longer than 1/10th of the original paper * List the main points of the paper in the same order they appear on the document in the attachment * Write a s
If you were completing a capital budgeting analysis for the firm you work for today (bank), which single financial analysis technique would you use to determine if you should spend $50,000 on a new computer server and why?I just need a paragraph. thanks
The Bingo Corporation is in the process of determining which of the following two projects that they may invest in. The details are provided below: Project A B Cost of Capital 12% 12% Life of project 20 years 20 years Annual cash flow $350,000 $400,000
Depreciation provides a sort of shield against taxes. If there were no taxes, there would be no depreciation tax shields. Does this mean that a project's NPV would be less if there were no taxes? Explain.
A calculation and comparison of the net present value (NPV) of Cash Flow if the client exercises non qualified options
According to the question, I don't know how to calculate and compare the NPV of cash flow if the client exercise non qualified stock option. The client has two options as follow: 1. Exercise the option and then sell enough shares to generate the cash necessary to pay his income tax and hold the remaining shares as an investme
Sewart Associates is considering a project that has the following cash flow data. What is the project's payback? Year Cash flow 0 ($1000) 1 $300 2 $310 3 $320 4 $330 5 $340 a. 2.11 years b. 2.34 years c. 2.60 years d. 2.89 years e. 3.21 years.
Davis Industries must choose between a gas-powered and an electric powered forklift truck for moving materials in its factory. Since both forklifts perform the same function, the firm will choose only one. (The are mutually exclusive investments) The electric powered truck will cost more, but it will be less expensive to operate
6. Elmdale Enterprises is deciding whether to expand its production facilities. Although long term cash flows are difficult to estimate, management has projected the following cash flows for the first two years (in millions of dollars): Year 1 year 2 Revenues 125 160 Cost of goods sold and operating
1. You are considering opening a new plant. The plant will cost $100 million upfront and take one year to build. After that, it is expected to produce profits of $30 million at the end of every year of production. The cash flows are expected to last forever. Calculate the NPV of this investment opportunity if your cost of ca