Explore BrainMass

Net Present Value (NPV)

Finance Questions: Capital Budgeting

1. Your firm and a possible project have the following cash flows: Company Project Economy good bad good bad Year 0 -200 -200 -50 -50 Year 1 100 50 20 60 Year 2 120 60 30 50 Year 3 110 55 40 90 Year 4 90 45 35 70 Given 8% discount rate, a 60% chance of a good economy over the next 4 years

4 Finance Questions

1) Mesmer Analytic, a biotechnology firm, floated an initial public offering of 2,000,000 shares at a price of $5.00 per share. The firm's owner/managers held 60 percent of the company's $1.00 par value authorized and issued stock following the public offering. One month after the IPO, the firm's board of directors declared a on

Pay Back Period

Your CEO insists that all projects should have a payback period of four years or less. As a result, attractive long-lived projects are being turned down. The CEO is willing to switch to a discounted payback with the same four-year cut-off period. Would this be an improvement? Please prepare a 5 to 6 page discussion paper det

A capital budgeting model

A company has six different opportunities to invest money. Each opportunity requires a certain investment over a period of 6 years or less. The company wants to invest in those opportunities that maximize the combined Net Present Value. It also has an investment budget that needs to be met for each year. We assume that it is po

Question about Sensitivity analysis

Conduct a sensitivity analysis on the following "what if" scenarios: a. What happens if the country you have chosen has provided incentives to invest? Now that your company has started to become profitable, the country is taking the incentives back. How do you determine the residual value at the end of the project life?

Financial Analysis

How large are the monthly payments of a recent, college graduate with $35,000 in student loans, if the payments are to be made for 10 years and the annual interest rate on the loans is 6.0%? What amount would you accumulate if you paid $500 at the end of every quarter for 25 years, earning an annual percentage rate of 8%

Important Information about Corporate Finance Questions

1. Allegan Manufacturing Company manufactures one product, which it sells for $200 per unit. Total dollar sales are $10 million and variable costs are $75 per unit. The company's fixed cost is $3 million. What is the firm's breakeven output? 2. Assume that you purchased a 7-year, 8 percent savings certificate for

MBA - Financial Management (Discounted Cash Flow Analysis

Help with financial Management Problem:- Schmidt A.G. is considering the replacement of three hand loaded block milling machines with an automatic milling machine. The three hand -loaded machine are only three years old and were purchased at a total cost of DM300,000. The useful life of the machines at the time of their purch

Description of Net Present Value Analysis

I need help with this problem. I am assuming I need to evaluate the IRR in order to make a determination on which method to choose based on NPV analysis. How would I do this in an Excel spreadsheet? Additionally, based on NPV analysis why is one method more preferable than the other? Dixie Dynamite Company is evaluating two m

Net Investment, Net Cash Flows & NPV for Projects

1. Goal to have 1,500,000 in 25 years for retirement. Anticipate an interest rate of 10% compounded annually, with deposits at the beginning of each of the next 25 years. First payment is today. How much must you deposit each year to meet the goal? 2. You are borrowing $750,000 to invest in commercial real estate property. Th

Finance Problems

You invest a single amount of $12,000 for 5 years at 10 percent. At the end of 5 years you take the proceeds and invest them for 12 years at 15 percent. How much will you have after 17 years? Mr. Flint retired as President of the Color Tile Company but is currently on a consulting contract for $45,000 per year for the

Cash Flow Analysis and NPV

Lou Lewis, the president of Lewisville Company has asked you to give him an analysis of the best use of a warehouse the company owns. a. Lewisville Company currently is leasing the warehouse to another company for $5000 per month on a year-to-year basis. b. The warehouse's estimated sales value is $200,000. A commercial Rea

Finance Problems

1. A General Motors bond (face value of $1,000) carries a coupon rate of 8 percent, has 9 years until maturity, and sells at a yield to maturity of 9 percent. a. What interest payments do bondholders receive each year? b. At what price does the bond sell? (Assume annual interest payments.) c. What will happen to the bond pr

Probability of high demand, NPV

1. Whyth Motors has decided to run a marketing test to determine the demand for its LEV. It figures that if the test results are positive, there is an 80% chance the demand will be high and the if the test results are negative, there is a 10% chance the demand will be high. If the chances of a positive test result for Whyth a


The top five executives at Marvel Manufacturing are paid annual bonuses based on predetermined earnings goals. These bonuses can be as much as 500% of salary. As a member of the company's compensation committee, you've been asked to comment on the following proposed changes to the annual bonus plan: Use after-tax income fro

Ojibwas County Jail

Ojibwas County Jail currently has its laundry done by a local dry cleaner at an annual cost of $46,000. It is considering a purchase of washers, dryers, and presses at a total installed cost of $52,000 so that inmates can do the laundry. The county expects savings of $15,000 per year, and it expects the machines to last five yea

DCF techniques to evaluate capital budgeting

D. Bogey, the owner of a nine-hole golf course on the outskirts of a large city, is considering a proposal that the course be illuminated and operated at night. Ms. Bogey purchased the course early last year for $480,000,. Her receipts from operations during the 28-week season were $135,000. Total disbursemets for the year, for

Your company has a new project to be considered...

Your company has a new project to be considered. You are given the following information on the best guess of related outcomes for the project. The cost of developing and market testing the product over the next year is $225 million. If the test is successful, which is expected to be 65%, the company will spend another $800 m

Net present value problem

You own an aluminum extrusion company. Your plant manager has recommended a new extrusion machine be bought for $250,000. He says it will save $65,000 per year in reduced labor costs and reduced aluminum waste. The machine will have a life of 8 years with no salvage value. Your required rate of return is 10%. a. Pl

Insider trading

Generally defined, insider trading is the buying or selling of a company's securities, by corporate officials or others with a fiduciary duty, on the basis of nonpublic information that's supposed to remain confidential. As noted in McLean (see the attached material, page 266) such inside trading is illegal under U.S. securities

NPV finance

Using NPV methodology rank the 4 projects from Most to least desirable for company profits. should any project be avoided? why? Project 1). Requires an initial cash expenditure of $ 50,000, has a 10% cost of capital, and will return 5 years of income flow in the amount of $ 15,000 each year. Project 2). Will require an ini

Scenario analysis and risk-adjusted NPV

Are you going to do the whole problem set for me or just part c and d? Also, can i get the answer in 3 hours? Thanks very much for your help. With the data provided, how can i perform the scenario analysis in excel and how to find the risk-adjusted NPV if the project appears to be more or less risky than an average project

Question about Allied Lemon Juice Project

I am having a problem finding out what the interest rates should be to complete the problem. How do I find the discount rate and the reinvestment rates. I could also use some help on figuring what the system is for determining the payback. TABLE IC11-1. ALLIED'S LEMON JUICE PROJECT (TOTAL COST IN THOUSANDS)

Effects on net working capitol

In identifying changes in net cash flows, which of the following would have the least (if any) effect on net working capitol? a) Making cash purchases of land for a new baseball manufacturing plant b)Allowing your sales staff to make more sales on credit c) Doubling the size of inventory to accommodate new product lines d)

Net Present Value - Lottery Ticket

Imagine that you stumble across a winning lottery ticket whose prize is a million dollars. Your first reaction, no doubt, would be to ask how the prize money will be paid out so that you could compute its present value. (1) Suppose it is to be paid out in 10 installments of $100,000 each. If the interest rate is 5%, what is

NPV and real cost

A company is evaluating two mutually exclusive projects B and C, each having a useful life of 3 years. B requires an immediate capital outlay of £1.2m while C required £1m. In the absence of cost and price inflation, the cash flows shown in the following table would remain constant throughout the life of the each project and a