You win the lottery for $20 million! You have a choice to take $1 million now and $1 million for the next 19 years OR take $10.6 million today. Assume you expect to earn 6% on your investments. Hint: You are actually comparing a 19 year annuity @ $1 million a year vs. $9.6 million ($10.6 minus $1). You need to find out wh
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If a company reported net income in 2007 of 2.4 million on total revenues of $30 million and depreciation expense totaled $1 million. What were total expenses for 2007 What were total expenses for 2007, assuming all expenses except depreciation were cash expenses What was the companyâ??s 2007 cash flow
Jake's Bunker (Bob's Country Bunker), a chain of economically priced motels in the Midwestern United States has reviewed its current target structure of 40% debt and 60% equity. It can issue debt at a rate of 9%. The last dividend paid on its stock was $1.25. The company is doing very well and expects to maintain its current
A project will produce an operating cash flow of $14,600 a year for 8 years. The initial fixed asset investment in the project will be $48,900. The net after-tax salvage value is estimated at $11,000 and will be received during the last year of the project's life. What is the NPV of the project if the required rate of return is
1. You are a consultant to a firm evaluating an expansion of its current business. The cash-flow forecasts (in millions of dollars) for the project are: Years Cash Flow 0 -100 1 - 10 +15 On the basis of the behavior of the firm's stock, you believe that the beta of the firm is 1.4. Assumi
See the attached file. Relationship between future value and present value-Mixed stream Using only the information in the accompanying table, answer the questions that follow. a. Determine the present value of the mixed stream of cash flows using a 5% discount rate. b. How much would you be willing to pay for an oppor
1. FOR EACH OF THE CASES SHOWN IN THE TABLE BELOW, 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, SEMI ANNUALLY AND QUARTERLY AT THE RATE SPECIFIED OVER THE GIVEN PERIOD. CASE SINGLE CASH FLOW
Preston Corporation is evaluating its potential investment in a $225,660 piece of equipment with a 3 year life and no salvage value. The company anticipates that pre-tax cash flows in each of the three years will equal 22 percent, 44 percent, and 66 percent, respectively, of the investment's face value. The tax rate is 28 percen
Problem One: The Percolator Company has the following capital structure: Common stock ($5 par, 250,000 shares) $1,250,000 Contributed capital in excess of par $5,000,000 Retained earnings $4,000,000 The company declares a 10 percent stock dividend. The pre-stock dividend market price of the company's stock is $50. (a).
There are many different valuation models. What are some of them and how are they used to value an asset or business entity? Can you make any suggestions on how to enhance any of the valuation models to make them more accurate?
Choose three publicly held companies on the Internet. Include at least two manufacturing companies (there must be a product). None can be a financial institution such as a bank or an insurance company. Refer to the financial statements and, for each of the last three years, identify Net Income and Cash Flow from Operating Activi
1. Which of the following is not considered in the price-earnings ratio technique? a) Firm's required rate of return on equity (k) b) Firm's dividend payout ratio (D/E) c) Firm's expected growth rate of dividends (g) d) All of the above are components of P/E ratio e) None of the above are components of P/E ratio
Using AT&T: identify appropriate industry comparisons for the company and develop a fundamental analysis of the company using the analytical tools such as the Dupont Framework. For my purposes I am comparing Sprint and Verizon. Using market information to do comparisons (PE ratio, etc), develop valuation of company using g
Java Corporation is trying to select the best investment from among four alternatives. Each alternative involves an initial outlay of $100,000. Their cash shows follow: Year A B C D 1 $10,000 $50,000 $25,000 $0 2
See the attached file. The questions are related to McCormick & Company 2009 annual report. http://www.mccormickcorporation.com/ Problem 1 The following questions all relate to McCormick's 2009 Statements of Cash Flow, Balance sheet, and Income Statement. (1) The change in accounts receivable, net of allowance
IGT, Inc. just paid a dividend of 1.75 per share. Analysts believe dividends will grow 16% per year for the next 5 years, and at 1% after that. How do I calculate the value of a share if the required return on the company's shares is 12%?
See the attached file for the table to problem 2. 1. Key differences between common stock and bonds include all of the following EXCEPT A) common stockholders have a voice in management; bondholders do not. B) common stockholders have a senior claim on assets and income relative to bondholders. C) bonds have a stated ma
What does it take to determine the present value of an investment? How would you project the future cash flows? How do you determine what discount, or interest, rate to use? Think about today's economy. How would you use the current information to determine the value of an investment? Would it be higher or lower than it was a ye
Use both the CAPM (capital asset pricing model) and the constant growth model (CGM) to arrive at XYZ's stock price. Find an estimate of the risk-free rate of interest (krf). To obtain this value, go to Bloomberg.com: Market Data and use the "U.S. 10-year Treasury" bond rate (middle column) as the risk-free rate. In addition,
Your client is considering the purchase of $100,000 in common stock, which pays no dividends and will appreciate in market value by 10 percent per year. At the same time, the client is considering an opportunity to invest $100,000 in a lease obligation that will provide the annual year-end cash flows listed in the table below.
Question: A firm has the following investment alternatives: Cash Inflows Year..............A.............B............C 1.................$500.........$0..........$0 2...................500.........400..........0 3...................500.........800..........0 4...................600.........900.......1,900 Which investm
Cash flows: It is typical for Jane to plan, monitor and assess her financial position using cash flow over a given period, typically a month. Jane has a savings account and her bank loans money a 6% per year while it offers short term investment rates of 5%. Jane's cash flows during August were as follows: Item Cash inflow C
Please help explain or simplify the following questions concerning cash flow analysis. If there is a recent trend of negative cash flow, but the company's P&L statement is showing its running a profit, how can this be and how would you evaluate the state of the organization? Explain why comprehending and managing cash flow
Bowdeen Manufacturing intends to issue callable, perpetual bonds with annual coupon payments. The bonds are callable at $1,280. One-year interest rates are 12 percent. There is a 50 percent probability that long-term interest rates one year from today will be 17 percent, and a 50 percent probability that they will be 8 percent.
What is your personal discount rate or rate of preferences? I.e. how much would you pay for a promise of $1000 to be received one year from now? Would you discount it by 10%, 5%, etc? and why ?
Can you help me get started on this assignment? Exercises: 1) For 2006, Treasury bonds with 5-year maturities offered a return about 8.65%; face value of $1,200; and 7.25% coupon rate. What would be the present value of this bond? 2) Mrs. Smith has 20 common stocks from A&T Global Enterprises. If the A&T Global Enter
Calculate the 1.5-year theoretical spot rate if the 6-month spot rate is 1.75 percent and the 1-year spot rate is 1.95 percent. The 1.5-year note has a coupon of 3 percent and is selling for $101.3518. (Quotes are in decimals, not 32nds.) Then based on the data and your calculations, calculate the six-month forward rate 1.0 y
A proposed expansion project is expected to increase sales of JL Ticker's Store by $35,000 and increase cash expenses by $21,000. The project will cost $24,000 and be depreciated using straight line depreciation to a zero book value over the 4 yr life of the project. The store has a marginal tax rate of 30%. What is the operati
1. Ajax Leasing Services has been approached by Gamma Tools to provide lease financing for a new automated screw machine. The machine will cost $220,000 and will be leased by Gamma for five years. Lease payments will be made at the beginning of each year. Ajax will depreciate the machine on a straight-line basis of $44,000 pe
Decision Tree Analysis: Use decision tree analysis to recommend a production schedule and decide whether to publish the book.
Harvey Publishing Company, a small publisher in Columbus, is considering a new book. Typesetting and related costs to prepare for the production are $10,000. It will cost $2 per copy to produce the book. If additional copies are needed at a later time, the set-up cost will be$5,000 and the cost per copy will again be $2. The boo