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Long Term Financing Analysis: Capital Investment & Analyses

Explain the concepts of net present value and internal rate of return analysis. What do the results of net present value and internal rate of return analysis tell senior managers of an organization? Would sensitivity analysis be a useful tool for assessing this capital project's risk and return?

Firm's investment in accounts receivable

The Hamlin Corporation has an inventory conversion period of 60 days, a receivables collection period of 30 days, and a payables deferral period of 30 days. Its annual credit sales are $5,000,000, and its annual cost of goods sold (COGS) is 60% of sales. a. What is the length of the firm's cash conversion cycle? b. What

Inefficient Market Investments

You are an investment advisor. Your 60 year old client with $200,000 in investable assets firmly believes in market inefficiency. Suggest and discuss five specific real-world investments you would recommend to this person.

Present Value

You must choose between two passive investments. Investment A requires an initial investment of $50,000 but will return $71,000 in three years. Investment B requires an initial investment of $45,000 but will return $60,000 in two years. You choose a discount rate of 10% to make your decision. What is the present valu

Compounding

You are quoted an intrest rate of 6% on an investment of 10 million. What is the value of your investment after four years if intrest is compunded annually, monthly, continously? What is the PV of $100 received in Year 10 at a discount rate of 1% Year 10 at a discount rate of 13% Year 15 at a discount rate of 25% Each of

Net effect on the balance on goods and services

Suppose a nation's savings, gross private domestic investment, government spending, and taxes remained unchanged from period 1 to period 2, but tariffs and quotas on imported goods and services rose by 20% from period 1 to period 2. The net effect on the balance on goods and services would be: A. It would make the balance

Spending calculations

Assume that the officials in Ecoland have compiled the following information about their economy for last year: Y = 10,000 C = 6,000 T = 1,500 G = 1,700 The government uses the following equation for the investment function: I = 3,300 ââ?¬" 100r Where r = equal to Ecoland's real interest rate. Calculate, t

Investment Banking

Plant Inc. is considering making an offer to purchase Palmer Corp. Plant's VP has collected the following information: Plant Palmer Price-earnings Ratio 14.00 11.0 Shares Outstanding 1,000,000 620,000 Earnings

Harrod-Domar growth model

Suppose that the country of less developed has a gross savings rate of 20%, a depreciation rate of 3%, and an incremental capital -output ratio (ICOR) of 2.5. 1- Using the Harrod -Domar (or AK) growth model, calculate the implied rate of growth of GNP per capita? 2- if the population growth rate in less developed is 1.5% per

Problems Regarding Capital Market and the Investment Decision

For each of the following, decide whether you agree or disagree and explain your answer: a. Savings and investment are just two words for the same thing. b. When I buy a share of Microsoft stock, I have invested; when I buy a government bond, I have not. c. Higher interest rates lead to more investments because those in

Finance NPV and IRR

A project is expected to generate cash flows of $14,000 annually for five years plus an additional $27,000 in year 6. The cost of capital is 10%. a. What is the most that you can invest in this project at time 0 and still have a positive NPV? b. What is the most that you can invest in this project at time 0 if you wan

Discounted Payback, IRR

The following projects are being considered by the Corporate Investment Committee who has an investment budget of $900,000. The budget restriction is for the up front investment in the current year only. The MARR used for the evaluation should be 12%. a) Which project(s) should be chosen if the discounted payback must be a

APR Problem

At the 5th birthday of each of their children, Tom and Sarah made a one-time $5,000 investment with a APR of 9.4% compounded annually. When each of their children retired 60 years later, what was this worth.

Evaluate Alternative Retirement Plans

Use attached spreadsheet to help you quickly evaluate alternative retirement plans. Create a tabulation that automatically shows the results from changes in the data block. The tabulation that you create should have at least the columns as shown below, with a row for each year starting with a present age of 25 and ending with a

Unions and Investment Tax Credits

In an effort to stop the migration of many of the automobile manufacturing facilities from the Detroit area, Detroit's city council is considering passing a statute that would give investment tax credits to auto manufacturing. Effectively, this would reduce auto manufacturing costs of using capital and high tech equipment in the

Determine the investment level.

If XYZ Corp. can undertake the following projects: Project 1: Required investment: $10 million Expected rate of return: 12% Project 2: Required investment: $2 million Expected rate of return: 15% Project 3: Required investment: $5 million Expected rate of return: 10% Project 4: Required investment: $8 million

Loan types

3. You have a choice of two investment accounts. Investment A is a 15-year annuity that features end-of-month $1,200 payments and has an interest rate of 8.5 percent compounded monthly. Investment B is an 8 percent continuously compounded lump sum investment, also good for 15 years. How much money would you need to invest in B

Investment banking question

What does the following statement mean? Investment banking is a demanding profession; investment banks want the employees to work as hard as possible.

Determining Net Present Value: Example Problem

A project will produce cash inflows of $1,750 a year for four years. The project initially costs $10,600 to get started. In year five, the project will be closed and as a result should produce a cash inflow of $8,500. What is the net present value of this project if the required rate of return is 13.75%? A. -$5,474.76 B. -$

Present value

30. Which one of the following statements concerning net present value (NPV) is correct? A. An investment should be accepted if, and only if, the NPV is exactly equal to zero. B. An investment should be accepted only if the NPV is equal to the initial cash flow. C. An investment should be accepted if the NPV is positive and

Findng the Gross Private Domestic Investment

Personal consumption expenditures $ 2,100 billion Gross private domestic investment $ 500 billion Government purchases of goods and services $ 700 billion Exports $ 450 billion Imports $ 500 billion Indirect business taxes $ 300 billion Net private domestic investment

Gross private domestic investment spending is evaluated.

1. Which of the following is not included in gross private domestic investment spending? Household spending on durable goods. Spending on business inventories. Business spending on plant and equipment. Household spending on residential construction none of the above All o

Evaluating the proposed project

Please help with the following problem. Evaluate the feasibility of investing 95,000$ in a piece of equipment having a 5-year life. In assessing the proposed project, you have been able to estimate the cash flows associated with the proposed project to be: Year Amount 1 20,000 2 25,000

Investment determination

Dayton Company has $15,000 to invest. It is trying to decide between two alternative uses of the funds. The alternatives are: Project A Project B Investment required $15,000 $15,000 Annual cash flows 4,000 - Singe cash flow at the end of 0f 10 years - 60,000 Project life 10 years 10 years Dayton's cost of capital of

Clare company: NPV

Clare Company is considering the purchase of some labor-saving equipment for its packaging department. The equipment is expected to result in labor cost savings of $50,000 per year for the expected 5 year life of the equipment. The cost of the equipment is $120,000 and the desire rate of return is 6%. What is the NPV for th

CAPm required return on portfolio

Investment Mark averaged a 20% return with a portfolio beta 1,5 and John averaged a 15% return with a portfolio beta 1,2. The t bill rate was 5% and the market return was 13% Which is better? a. Mark because he generated a larger alpha b. John because he generated a larger alpha c. Mark because he generated a high

amount of investments accumulate

5-1A. (Compound interest) To what amount will the following investments accumulate? a. $5,000 invested for 10 years at 10 percent compounded annually b. $8,000 invested for 7 years at 8 percent compounded annually c. $775 invested for 12 years at 12 percent compounded annually d. $21,000 invested for 5 years at 5 percent