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
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
JVC Inc. has decided to go public with a $5,000,000 new equity issue. Its investment bankers agreed to take a smaller fee now (6 percent of par value versus 10 percent) in exchange for a 1-year option to purchase an additional 200,000 shares of the company at $5.00 per share. The investment banking firm expects to exercise its o
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 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
Calculate the NPV of the following project using a discount rate of 12%. YR0 = -$500; YR1 = -$50; YR2 = $50; YR3 = $200; YR4 = $400; YR5 = $400
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?
How does Time value of money associated with commerical bank?
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
Senior management is considering two new warehouse locations in order to serve its customers in the North and West more efficiently. Unfortunately, the company only has sufficient funds to invest into only one warehouse location at this time. Each warehouse will require that a new building be constructed. Claire's Antiques expec
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%
Magiclean Corporation is considering the acquisition of Dustvac Inc. Magiclean's analysts project the following postacquisition cash flows for Dustvac (in millions of dollars): Year 1 Year 2 Year 3 Year 4 Net Sales $200 $181 $195 $226
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
Velcro Saddles is contemplating the acquisition of Pogo Ski Sticks, Inc. The values of the two companies as separate entities are $20 million and $10 million, respectively. Velcro Saddles estimates that by combining the two companies, it will reduce marketing and administrative costs by $500,000 per year in perpetuity. Velcro S
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
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?
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
What is the net present value of a project that has an initial cash outflow of $12,670 and the following cash inflows? The required return is 11.5 percent. Year Cash Inflows 1 $4,375 2 $0 3 $8,750 4 $4,100
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
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
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
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
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
Washington Orchards is considering purchasing a cherry orchard. Once purchased there is a 92% chance that the NPV of the firm will increase by $95 million. Otherwise the NPV of the firm will decrease by $10 million. What is the NPV of the orchard?
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 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
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
Given the opportunity to invest in one of the three bonds listed below, which would you purchase? Assume an interest rate of 7%. >>> (see data in the attached file) <<<
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
Question 3. Kanga Resorts is interested in developing a new facility in Asia. The company estimates that the hotel would require an initial investment of $14 million. The company expects that the facility will produce positive cash flows of $2.6 million a year at the end of each of the next 10 years. The project's cost of ca