4) A mutual fund earned 10% over the last year, 12% over the last two years, and 15% per year over the last 3 years. (all returns are geometric averages). If you invested $10,000 per year in the fund, in each of the last three years, how much would your investment be worth today. What is your average return IRR?
Background Data and Information You are the CFO of Delta International, a manufacturer of ski bindings. You are planning your capital budget for next fiscal year and have gathered the following information: Your investment banker indicates that if Delta issues four million dollars in bonds the expected yield will be 7 pe
The management of Kitchen Shop is thinking of buying a new drill press to aid in adapting parts for different machines. The press is expected to save Kitchen Shop $8,000 per year in costs. However, Kitchen Shop has an old punch machine that is not worth anything on the market and that will probably last indefinitely. T
Nucore Company is thinking of purchasing a new candy-wrapping machine at a cost of $370,000. The machine should save the company approximately $70,000 in operating costs per year over its estimated useful life of 10 years. The salvage value at the end of 10 years is expected to be $15,000. (Ignore income tax effects.) Please
You intend to set up a mail order gift basket business in your home while you attend college. You expect the following cash flows: Year Cash Flow 1 $5,000.00 2 $8,000.00 3 $1,200.00 4 $1,400.00 You can borrow at 11% to start this business. What is the current value of the expected cash flow str
Woodgate Inc. is considering a project with the following after-tax operating cash flows (in millions of dollars): Project Year Cash Flow 0 -$300 1 125 2 75 3 200 4 100 The project has a WACC of 10%. What is the project's IRR?
A new computer system will require an initial outlay of $20,000 but it will increase the firm's cash flows by $4,000 a year for each of the next 8 years. Is the system worth installing if the required rate of return is 9 percent? What if it is 14 percent? How high can the discount rate be before you would reject the proj
Two projects being considered by a firm are mutually exclusive and have the following projected cash flows: Project A Project B Year Cash Flow Cash Flow 0 ($100,000) ($100,000) 1 39,500
How do I use EXCEl to calculate the NPV and IRR of the following scenario: - Cost (Year o): $10,000. - Year 1 Return: 3,000 - Year 2 Return: 3000 - Year 3 Return: 5,000 Discount Rate:10%
Unifying Concepts: Net Present Value and Internal Rate of Return Methods Julie Kowalis, an investment analyst, wants to know if her investments during the past four years have earned at least a 12% return. Four years ago, she had the following investments: a. She purchased a small building for $50,000 and rented space in
1. Mesa Products Inc. requires a new machine to produce a part for a solar air conditioner. Two companies have submitted bids, and you have been assigned the task of choosing one of the machines. Cash flow analysis indicates the following: Year Machine A Machine B 0 -1,000 -1,000 1 0 417 2 0
Pure Life (a juice company) owns a building, which is fully depreciated. Equipment Cost: $200,000. plus an additional $40,000. for shipping and installation Inventories would rise by $25,000. and accounts payable would go up by $5,000. All of these costs would be incurred at t =0. The machinery could be depreciated und
The management of a kitchen shop is thinking of buying a new drill press to aid in adapting parts for different machines. The press is expected to save the kitchen shop $8,000 per year in costs. However, the kitchen shop has a old punch machine that is not worth anything on the market and that it will probably last indefinitely.
Suppose you have a project with a cash flow of -150,000 today, +900,000 in one year and -1,000,000 in two years. What would be the IRR of this project?
In what sense is a reinvestment rate assumption embodied in the NPV, IRR, and MIRR methods? What is the assumed reinvestment rate of each method? As a financial officer, you must determine which project your company should accept. The projects are mutually exclusive and the net present value (NPV) calculations for each take i
16. Congratulations! You just finished a successful year (YEAR NUMBER 2) as Chief Financial Officer of "Body Fumigation Development" (BFD) and animal extermination facility. The CEO just asked you for a quick, summarized copy of the financial statements. Of course you say, no problem boss, it will only take me a few minutes
P.1 You know that when expanding and investing in projects overseas as Acme plans to, it is essential to understand such things as return on equity (ROE) and internal rate of return (IRR). Using Internet sources (you may want to start with the websites listed below) gather information on ROE and IRR. Post a two to three par
The following informtion applies, can this be solved using excel? Equity shares outstanding - 20 million Stock price per share - 10 Yield to maturity debt - 12 Book value of interest-bearing debt - 180 million Coupon interest rate on debt - 7% Market value debt - 200 million Book value of equity 100 million Cost o
Suppose a project costs $300 and produces cash flow of $100 over each of the following six years. What is the IRR of this project?
What is the IRR of an investment that costs $77,700 and pays $27,500 a year for 4 years?
Given the information below how would you determine IRR and WACC, ie formulas used? Equity shares outstanding - 20 million Stock price per share - 10 Yield to maturity debt - 12 Book value of interest-bearing debt - 180 million Coupon interest rate on debt - 7% Market value debt - 200 million Book value of equity 100 mi
A two-year investment of $2,000 results in a return of $150 at the end of the first year and a return of $150 at the end of the second year, in addition to the return of the original investment. The internal rate of return on the investment is: a. 6.4% b. 7.5% c. 15.0%
1. Myers Business Systems is evaluating the introduction of a new product. The possible levels of unit sales and the probabilities of their occurrence are given below: Possible Sales Market Reaction in Units Probabilities Low response . . . . . . . . . . . . . 20 .10 Moderate response . . . . . . . . . 40 .30 High response
As the director of capital budgeting for Denver Corporation, you are evaluating two mutually exclusive projects with the following net cash flows:. Year Project X cash flow Project Z cash flow 0 -$100,000 -$100,000 1 50,000 10,000 2
An investor is considering two projects, A and B. Project A involves the purchase of a five year interest on a property for £600,000. He will then receive rent income from the property fixed for the five year period at the rate of £150,000 per annum, payable annually in advance. Management and maintenance costs are fixed a
13-2 How is a project classification scheme (for example, replacement, expansion into new markets, and so forth) used in the capital budgeting process? 13-3 Explain why the NPV of a relatively long-term project, defined as one for which a high percentage of its cash flows are expected in the distant future, is more sensitive
Nucore Company is thinking of purchasing a new candy-wrapping machine at a cost of $370,000. The machine should save the company approximately $70,000 in operating costs per year over its estimated useful life of 10 years. The salvage value at the end of 10 years is expected to be $15,000. (Ignore income tax effects.) Require
18) Use the data below and consider portfolio weights of .60 in stocks and .40 in bonds. Rate of Return Scenario Probability Stocks Bonds Recession 0.2 -5% 14% Normal 0.6 15% 8% Boom 0.2 25% 4% a. What is the rate of return on the portfolio in each scenario? b. What is the expected retu
The management of Kitchen Shop is thinking of buying a new drill press to aid in adapting parts for different machines. The press is expected to save Kitchen Shop $8,000 per year in costs. However, Kitchen Shop has an old punch machine that isn't worth anything on the market and that will probably last indefinitely. The new pres
2. The term mutually exclusive investments mean: a. Choose only the best investments. b. Selection of one investment precludes the selection of an alternative. c. The elite investment opportunities will get chosen. d. There are no investment options available. ABC Company is considering two investments both of which cost