We are developing a new software system for one of our clients. The system has an up-front cost of $75 million (at t = 0). We have forecasted their inventory levels for the next five years as shown below: Year Inventory 1 $1.0 billion 2 1.2 billion 3 1.6 billion 4 2.0 billion 5 2.2 billion We forecast that its new s
Company A is considering a major expansion of its business. The details of the proposed expansion project are summarized below: ? The company will have to purchase $500,000 in equipment at t = 0. This is the depreciable cost. ? The project has an economic life of four years. ? The cost can be depreciated on a MACRS 3-ye
Can you help me with this assignment? Returns on the market and Company Y's stock during the last 3 years are shown below: Year Market Company Y 2002 -24% -22% 2003 10 13 2004
Overview of Big Crick River Site The proposed Big Crick River site is located .23 miles due west of the intersection of Bronco Road and Route 180 in the southwest corner of Johnson County. The Big Crick River is a strong-flowing, medium-sized river that is approximately a quarter-mile wide at the proposed project site. At this
My Corporation has been presented with an investment opportunity which will yield end-of-year cash flows of $30,000 per year in Years 1 through 4, $35,000 per year in Years 5 through 9, and $40,000 in Year 10. This investment will cost the firm $150,000 today, and the firm's cost of capital is 10 percent. What is the NPV for t
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
Refunding Net Present Value The city of Los Angeles issued $1,000,000 of 15 percent coupon, 20-year, annual payment, tax-exempt muni bonds 15 years ago. The bonds had a 10 year call protection, but now Gainesville can call the bond if it chooses to do so. The call premium would be 5 percent of the face amount. New 5-year, 13
The State of Florida issued $1,000,000 of 12 percent coupon. 10-year annual payment, tax-exempt bonds 5 years ago. The bond had 5 years of call protection, but now the state can call the bond if its chooses to do so. The call premium would be 2 percent of the face amount. The 5-year, 10 percent, annual payment bond can be sold a
Sussex LLC operates an active business (a chain of music stores) and also owns commercial real estate. The average annual income from its music business is $950,000, and the average annual rent income from its real estate is $50,000. Ms. Reynolds, who actively participates in the music business, owns a 10 percent interest in Sus
The Best Manufacturing Company is considering a new investment. Financial projections for the investments are tabulated below. Cash flows are in $ thousands, and the corporate tax rate is 34 percent. Assume all sales revenue is received in cash, all operating cost and income taxes are paid in cash, and all cash flows occurs a
Using the information below, calculate the payback period and the NPV. Cost of capital 13%. Initial investment $100,000. Cash Inflow 1 15,000 Cash inflow 2 20,000 Cash inflow 3 30,000 Cash inflow 4 35,000 Cash inflow 5 40,000 Is the IRR closest to: a. 3.5% b. 5.5% c. 10.5% d. 20.5%
1. Find Net Operating Capital (Assume other current liabilities to be accruals) Current Assets Cash and cash Equivalents 1,200,000 Short term investments 2,190,000 Net receivables 2,287,000 Inventory 1,544,000 Other current assets 500,000 Current liabilities Accounts payable 5,300,000 Short/Curr
The State Power and Electricity Commission has branch offices in two country towns, Rundown and Brokendown. As well as providing customer account payment services, the offices also serve as bases for technicians who do repair and maintenance work on power lines and equipment in the area. The Commission is considering closin
An Australian manufacturing company with all shareholders located in the Ivory Coast, a country located off the mainland of Africa. The financial manager is currently in the process of evaluating two types of quality control systems for installation in the company's manufacturing plant. The company is all equity financed, wi
How accurate do you think a company's estimates of the net present value of a proposed project are under the following scenarios? Are there any important differences in the accuracy to be expected in the various scenarios? a) Buying new equipment for a factory line at Ford. b) Putting a value on a patent for a new drug at Pf
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
Dino Corporation is trying to decide which of five investment opportunities it should undertake. The company's cost of capital is 16%. Owing to a cash shortage, the company has a policy that it will not undertake any investment unless it has a payback period of less than three years. The company is unwilling to undertake more th
* The Academic Computing Center has five trainers available in its computer labs to provide training sessions to students. Assume that the capacity of the system is 1900 students per semester and the utilization is 90%. If the number of students who actually got their orientation session is 1500, what is the efficiency of the
(See attached file for full problem description) --- 7.3 The Best Manufacturing Company is considering a new investment. Financial projections for the investment are tabulated below. Cash flows are in $ thousands and the corporate tax rate is 34 percent. Assume all sales revenue is received in cash, all operating costs and i
Your company needs to launch a new production facility to reach its strategic goals. The new facility will cost $15 million to acquire. The company will use it for 35 years, at which time the company expects to sell the facility for $1.2 million. The product from the new facility is expected to generate year-end net cash
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 into account the project's risk. Indicate which project (A or B) you would recommend and explain your reasons for this recommendation. Project A
"It is impossible to use DCF methods for evaluating investments in research and development. There are no cost savings to measure, and we don't even know what products might come out of our R&D activities." This is a quote from an R&D manager who was asked to justify investment in a major research project based on its expect
Need help with the following questions: 1. Calloway Cab Company determines its break-even strictly on the basis of cash expenditures related to fixed costs. Its total fixed costs are $400,000, but 20 percent of this value is represented by depreciation. Its contribution margin (price minus variable cost) for each unit is $3.6
See attached file for full problem description. 1. Suppose sales were $38,873, $45,626, and $57,689 for the years 2000, 2001, and 2002, respectively. Compute the annual growth rate in sales for 2001 and 2002. Compute the arithmetic average growth rate based on the annual growth rate calculations. Using the arithmetic average
What are some long term finance strategies? Give a brief example of how one might be used in practice.
(See attached file for full problem description) Determined Net Present Value with 0% discount rate, 10% discount rate, 20% discount rate and so forth. Draw a Net Present Value profile for the investment.
The Danforth Tire Company is considering the purchase of a new machine that would increase the speed of manufacturing and save money. The net cost of this machine is $66,000. The annual cash flows have the following projections. Year Cash Flow 1 $21,000 2 29,000 3 36,000 4 16,000 5 8,000 a. If the cost of capital is
A five-year project has a projected net cash flow of $15,000, $25,000, $30,000, $20,000, and $15,000 in the next five years. It will cost $50,000 to implement the project. If the required rate of return is 20 percent, conduct a discounted cash flow calculation to determine the NPV. Please explain using excel.
Rucci Inc. is considering a project that would require an initial investment of $462,000 and would have a useful life of 7 years. The annual cash receipts would be $300,000 and the annual cash expenses would be $120,000. The salvage value of the assets used in the project would be $69,000. The company's tax rate is 30%. For tax
Skyline Corp will invest $130,000 in a project that will not begin to produce returns until after the 3rd year. From the end of the 3rd year until the end of the 12th year (10 periods) the annual cash flow will be $34,000. if the cost of capital is 12% should this project be undertaken?