10. A project has an initial investment of $25,000, with $6,500 annual inflows for each of the subsequent 5 years. If the required return is 12%, what is the NPV? a. -$6,500.00 b. -$2,447.02 c. -$1,568.95 d. $ 215.46 e. $1,763.81
Tobacco Company of America is a very stable billion dollar company with sales growth of about 5 percent per year in good or bad economic conditions. Because of this stability (a correlation coefficient with the economy of + .3, and a standard deviation of sales of about 5 percent from the mean), Mr. Weed, the vice president of
We discussed Adjusted Present Value (APV) and then discussed and applied what Shefrin labeled as Behavioral APV. So this question is about that topic and as follows. Simply explain the intuition, the concept, and the logic behind both APV and behavioral APV. Moreover, explain how APV and behavioral APV help managers and investor
Business questions: general decision rule for NPV, use of inflation when evaluating firms, NPV vs real options and more...
Answer the below questions with at least five sentences each, >>>thoroughly and in your own words<<< ? Present the general decision rule for NPV. If a project has NPV = 0, should a manager accept the project? ? Define purchasing power parity. What is the importance of purchasing power parity to an analyst attempting to e
The Wexler Company is considering the purchase of a new machine costing $250,000. This machine is estimated to cost $5,000 per year in operating expenses but it will allow the company to earn an additional $100,000 per year in revenues and at the end of 3 years the machine will have a salvage value of $40,000. If the required ra
Please help with the following problem. Consider the following information for Ball Corp. Selling and administrative expense................................ $ 50,000 Depreciation expense.................................................. 80,000 Sales................................................................
Photographic laboratories recover and recycle the silver used in photographic film. Stikine River photo is considering purchase of improved equipment for their laboratory at Telegraph Creek. Here is the information they have: - The equipment costs $100,000 and will cost $80,000 per year to run. - It has an economic life of 1
Cash Flows and NPV. Johnny's Lunches is considering purchasing a new, energy-efficient grill. The grill will cost $40,000 and will be depreciated according to the 3-year MACRS schedule. It will be sold for scrap metal after 3 years for $10,000. The grill will have no effect on revenues but will save Johnny's $20,000 in energy ex
The Rustic Welt Company is proposing to replace its old welt-making machinery with more modern equipment. The new equipment cost $9 million (the existing equipment has zero salvage value). The attraction of the new machinery is that it is expected to cut manufacturing costs from their current level of $8 a welt to $4. However, a
Hampshire-Cathaway (H-C), a large established corporation with no growth in its real earnings, is considering acquiring 100% of the shares of Trilennium Corporation, a young firm with a high growth rate of earnings. The acquisitions analysis group at H-C has produced the following table of relevant data:
Question: Dane Cosmetics is evaluating a new fragrance-mixing machine. The machine requires an initial investment of $24,000 and will generate after-tax cash inflows of $5,000 per year for 8 years. For each of the costs of capital listed, 1) calculate the net present value (NPV), 2) indicate whether to accept or reject the machi
Vincent Corporation had income from continuing operations of $800,000 (after taxes) in 2007. In addition, the following information, which has not been considered, is as follows. 1. In 2007, Vincent experienced an uninsured earthquake loss in the amount of $200,000. 2. A machine was sold for $140,000 cash during the year a
Your firm has an average receipt size of $95. A bank has approached you concerning a lockbox service that will decrease your total collection time by two days. You typically receive 9,400 checks per day. The daily interest rate is .016 percent. If the bank charges a fee of $190 per day, should the lockbox project be accepted
Question 1 (2 points) Regarding the term 2/10 N/30, which one of the following is true? a. the first part says: if payment is received within 10 days, only 98% of the balance needs to be paid b. the second part says: a 30% discount is available if a minimum number (N) of items are purchased c. the second pa
Mark the correct answer or fill in the answer sheet at the end 1. Which of the following statements best represents what finance is about? a. How political, social, and economic forces affect corporations b. Maximizing profits c. Creation and maintenance of economic wealth d. Reducing risk 2. Which of the followin
The Hokie Corporation is considering two mutually exclusive projects. Both require an initial outlay of $10,000 and will operate for 5 years. Project A will produce expected cash flows of $5,000 per year for years 1 through 5, whereas project B will produce expected cash flows of $6,000 per year for years 1 through 5. Because pr
United Pigpen is considering a proposal to manufacture high protein hog feed. The project would make use of an existing warehouse, which is currently rented out to a neighboring firm. The next year's rental charge on the warehouse is $100,000 and thereafter the rent is expected to grow in line with inflation at 4% a year. In add
CORPORATE FINANCE. Eighth edition from: Ross. Westerfield. And Jaffe. ISBN 978-0-07-310590-1 MHID 0-07-310590-2 Part of ISBN 978-0-07-333718-0 MHID 0-07-333718-8 Please answer each of the following questions using the short answer format. The ideal responses for each question will be free of writing errors and mus
Please help answer the following problems. 1. The Payback period and the IRR methods are inferior to the NPV method, but firms still use these methods. Provide a rationale for this inconsistency. Why are they inferior to the NPV method? 2. Discuss some problems associated with cash flow estimation for a project.
The Jackson Company is considering the purchase of a new machine that is expected to reduce cash outflows. The cost of this machine is $29,000. The annual reduction in cash outflows is as follows: See attached doc. If the cost of capital is 10%, please calculate the following: - A. The Present Value of the Benefits (PVB)
1. What is the paycheck period for a 20,000 project that is expected to return 6,000 per year for the first two years and 3,000 per year for years three through five? 2. Rymer, Inc. is considering a new assembler, which costs 180,000 installed, and has a depreciable life of 5 years. The expected annual after tax cash flows fo
GSB CorpFin Inc. is considering issuing debt to finance its expansion in a strategic consulting division. Detailed analysis by the firm shows that an initial investment needed is $100mln and the present value of cash flows from this expansion (excluding the initial investment) is $500mln. $100mln is a fixed cost and the investme
You are a manger at Percolated Fiber, which is considering expanding its operation in synthetic fiber manufacturing. Your boss comes into your office, drops a consultant's report on your desk, and complains, We owe these consultants $1 million for this report and I am not sure their analysis makes sense. Before we spend the $
Fast Track Bikes is thinking of developing a new composite road bike. Development will take six years and the cost is $200,000 per year. Once in production, the bike is expected to make $300,000 per year for 10 years. 1. Assuming the cost of capital is 10%, calculate the NPV of this investment opportunity. Should the compan
19. Monson Company is considering three investment opportunities with cash flows as described below: Project A: Cash investment now $15,000 Cash inflow at the end of 5 years $21,000 Cash inflow at the end of 8 years $21,000 Project B: Cash investment now $11,000 Annual cash outflow for 5 years $ 3,000
General Auto (GA) Corporation is developing a new model of a compact hybrid car. This car is assumed to generate sales for the next five years. GA has gathered information about the following quantities through focus groups with the marketing and engineering departments. Fixed cost of developing the car. This cost is assume
See the attachment. thanks ABC is considering purchasing the existing business of a competitor who produces Model X-Ray Superconductors. The life of this product is estimated to be 20-years, after which the assets will be sold. The details of the transaction are as follow: Total purchase price: Company's assets (e.g
You are looking at a new project and you have estimated the following cash flows: Year 0:CF = ($147,500) Year 1:CF = $58,100 Year 2:CF = $62,900 Year 3:CF = $175,110 Your required return for assets of this risk is 12%. Calculate net present value.
Sandy Rose was given two options for receiving her winnings, if she won, from the Reader's Digest sweepstakes. Option A is a payment of $1 million immediately, plus $137,932 per year for the next 29 years. Option B is an immediate payment of $167,000, plus additional payments of $167,000 per year for the next 29 years. Which
I need help with the following... Brown Stone Corporation, maker of customized electric guitars is contemplating the investment of $1,000,000 in a new production facility. The economic life of the facility is estimated to be five years at which time the facility will be obsolete and have no salvage value. The firm will use