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Present value of money problem

1. A firm is expected to earn $10,000, $25,000, $48,000, and $75,000 during the next four years, after which it will be dissolved. What is the present value of the firm if the discount rate is 8%? Please show work and explain rationale.

Calculating NPV

For the cash flows in the previous below, what is he NPV at a discount rate of zero percent? What If the discount rate is 10 percent? If it is 20 percent? If it is 30 percent? Year Cash Flow 0 -$18,000 1 9,800 2 7,500 3 7,300

Financial Forecasting

Hello, I've been doing some trial on this specific problem, and have spent quite some time on it, but I still can't figure out the answers. I was actually wondering If I could have an hand in resolving the problem .

Calculating Profitability Index

What is the profitability index for the following set of cash flows if the relevant discount rate is 10 percent? What if the discount rate is 15 percent? If it is 22 percent? Year Cash Flow 0 -$12,000 1 6,200 2 5,600 3 3,900

NPV at Discount Rate: 0%, 10%, 20% and 30%

For the cash flows in the previous below, what is he NPV at a discount rate of zero percent? What If the discount rate is 10 percent? If it is 20 percent? If it is 30 percent? Year Cash Flow 0 -$18,000 1 9,800 2 7,500 3 7,300.

Present Value

Jean will receive $8,500 per year for the next 15 years from her trust. If a 7% interest rate is applied, what is the current value of the future payments? Describe how you solved this problem, including which table (for example, present value and future value) was used and why?

Leverage, Risk and Cost of Capital

Global Pistons (GP) has common stock with a market value of $200 million and debt with a value of $100 million. Investors expect a 15% return on the stock and a 6% return on the debt. Assume perfect capital markets. a. Suppose GP issues $100 million of new stock to buy back the debt. What is the expected return of the stoc

Leverage, Arbitrage and Firm Value

Suppose there are no taxes. Firm ABC has no debt, and firm XYZ has debt of $5000 on which it pays interest of 10% each year. Both companies have identical projects that generate free cash flows of $800 o $1000 each year. After paying any interest on debt, both companies use all remaining free cash flows to pay dividends each ye

Corporate finance

Paradise Enterprises has gathered projected cash flows for two projects. At what interest rate would the company be indifferent between the two projects? Which project is better if the required return is above this interest rate? Why? Year Project(I) Project(J) Difference ----------------------------------------------------

Stock Price Valuation: ABC Company

ABC Company has the following data: Current stock price = $10 Last Dividend paid = $0.5 Required rate of return = 10 % Assume that dividend is expected to grow at a constant rate, g, in the future. Assume that the company has a strong financial conditions and it is classified with low risk. Assume rs is expec

Stocks and their Beta's: Example Problem

A recent paper examined a Security Market Line analysis of eight Blue Chip stocks. The analysis determined the beta for each firm, the required return for stocks with that beta, and the currently expected return for that stock as follows: Firm Beta Required Return Currently Expected Return 1 0.9

Covariance and Expected Returns

You are building a two stock portfolio with securities ST and XY. Given the following information: - Standard deviation for stock ST = 15% - Standard deviation for stock XY = 25% - Expected return for stock ST = 18% - Expected return for stock XY = 24% - Correlation coefficient between ST and XY = 0.40 - 60% of the

Present Value with Continuous Compounding

At a 12 percent rate of interest, using continuous compounding, which of the following three options has the highest present value: Value Now Value in 1 Year Value in 2 Years A 0 0 230 B 0 100 110 C 100

IPO Underpricing: Johns Co. and Eversmann Co.

The Johns Co. and the Eversmann C0. have both announced IPOs at $40 per share. One of these is undervalued by $11, and the other is overvalued by $6, but you have no other way of knowing which is which. You plan on buying 1,000 shares of each issue. If an issue is underpriced, it will be rationed and only half your order will be

NPV - Net Present Value

Project K costs $52,125, its expected net cash inflows are $12,000 per year for 8 years, and its WACC is 12%, What is the projects NPV? CFt = expected net cash flow at time t = $12,000 r = the projects cost of capital or WACC N = is its life The cast outflow is $52,125

Accounting Fraud

The auditors of Annaly mortgage discovered that a lot of fictitious employees were on the payroll system and were being paid salaries. Neither the CFO nor the payroll manager was aware of the fraud. What could be the possible reasons for the fictitious employees being added on the payroll system? Discuss in detail.

Financial Planning

As a manager of a financial planning business you have two financial planners, Phil and Francis. In an hour, Phil can produce either one financial statement or answer 8 phone calls, while Francis can either produce 4 financial statements or answer 10 phone calls. Does either person have an absolute advantage in producing both pr

Calculating Equivalent Uniform Annual Cost: Example Problem

Please see the attached file. Your County is planning to build a park. The initial cost for the park will amount to $6,500,000. Annual maintenance and repairs will amount to: $25,000 for each of the first five years, $30,000 for each of the next ten years and, $35,000 for each of the next five years. In addition

unethical accounting practices

What are the consequences of a CPA or public accounting firm rendering an opinion based on unethical practices? How does unethical accounting behavior affect the profession? How can managers stop unethical accounting practices in the workplace?

Forecasting free cash flows: Example problem

A company forecasts the following free cash flows (shown in millions of dollars). If the weighted average cost of capital is 13 percent and the free cash flows are expected to continue growing at the same rate after Year 3, what is the Year 0 value of operations, to the nearest million? Year: 1 2 3 Free cash flow: -$20 $40 $42

Linear Programming Model

(Hospital Expansion Problem) Mt. Siani Hospital in New Orleans is a large, private, 600-bed facilty, complete with laboratories, operating rooms, and x-ray eqipment. In seeking to increase revenues, Mt. Sinai's administration has decided to make a 90-bed addition on a portion of adjacent land currently used for staff parking. Th

Value of annual cash flow

Beverly Enterprises owns a nursing home that is currently earning $2.0 million in cash flow on an annual basis, but this amount is expected to drop in the future. The nursing home has a book value of $20 million, a replacement cost of $40 million, and a current sale value of $10 million. If Beverly Enterprises has a cost of capi

Expected rate of return problem

Suppose a handbill publisher can buy a new duplicating machine for $500 and the duplicator has a 1-year life. The machine is expected to contribute $550 to the year's net revenue. What is expected rate of return? If the real interest rate at which funds can be borrowed to purchase the machine is 8 percent, will the publisher cho

Cost Plus Pricing

Document attached. Cost-Plus Pricing. Emerson Ventures is considering producing a new line of hang gliders. The company estimates that variable costs will be $325 per unit and fixed costs will be $330,000 per year. Required a. Emerson has a pricing policy that dictates that a product's price must be equal to full cost plus 6

Continuous Probablility distributions

1. For the following normal distributions with parameters as specified, calculate the required probabilities: a) &#956; &#8776; 5, &#963; = 2; calculate P( 0<x<8) b) &#956; &#8776; 5, &#963; = 4; calculate P( 0<x<8) c) &#956; &#8776; 3, &#963; = 2; calculate P( 0<x<8) d) &#956; &#8776; 4, &#963; = 3

Calculate maximum lump sum amount for future payments

Assume I won the 100 million dollars in a lottery that paid installments of 20 million dollars a year for five payments or a lump sum payment. I would get the first installment payment on the day I won the lottery and installments to follow for the next four years. Or I could take the lump sum payment the day I won the lottery.

Finding the Rate of Return Values

RKI Instruments manufactures a ventilation controller designed for monitoring and controlling carbon monoxide in parking garages, boiler rooms, tunnels, etc. The net cash flow associated with one phase of the operation is shown below. (a) How many possible rate of return values are there for this cash flow series? (b)