1 an investor bought 100 shares of omega common stock for

Assignment Help Portfolio Management

Reference no: EM13381238

1) An investor bought 100 shares of omega common stock for $9000. He held the stock for 9 years. For the first 4 years he receives annual end-of year dividends of $800. For the next 4 years he received annual dividends of $400. He received no dividend for the 9^th year. At the end of 9^th year he sold his stock for $6000. What rate of return did he receive on his investment?

2) Consider two mutually exclusive alternatives:

340_Determine the Rate of Return for the project.png

If the MARR is 10%, which alternative should be selected? (Incremental analysis required).

3) The manager of a large food processing corporation is trying to decide between two alternative designs for an oil press. The first alternative costs $250,000 and has a first-year operating cost of $45,000. Operating costs are estimated to increase by $5000 per year for each year after the first. The projected life time of this design is 8 years and there is no salvage value.

The second alternative costs $375,000 and has a first year operating cost of $15,000. The operating costs are estimated to increase at a rate of $7000 per year. The projected life time of design 2 is 10 years. There is no salvage value. The benefits of each design are identical and the plant will be in operation for a long time. Assuming an 8% interest rate which design should be chosen?

4) A new project has the following predicted profits. The initial investment is $3,000,000.

Year       Revenue
1            $200,000
2            $400,000
3            $600,000
4            $800,000
5            $1,200,000
6            $1,200,000
7            $1,400,000
8            $1,600,000

a) Determine the Rate of Return for the project.

b) If your company's MARR is 12%, should you invest?

5) You have been assigned to determine the RoR for a large, capital intensive project. The following cash flows have been predicted by the folks in marketing.

Year       Revenue
0           $150 million
1           $100 million
2           $-450 million
3           $-450 million
4           $250 million
5           $550 million

When you plug these numbers into a solver, two RoRs are revealed, 45.3% and 21.0%. Knowing that your company's einv = 15% and efin = 7.5%, what RoR do you report to your manager?

Reference no: EM13381238

Questions Cloud

Well-known financial writer andrew tobias argues that he : well-known financial writer andrew tobias argues that he can earn 177 percent per year buying wine by the case.

1 a firm expects to generate net income of 600 million 550 : 1. a firm expects to generate net income of 600 million 550 million and 500 million at the end of each of the next

Stephenson real estate recapitalization stephenson real : stephenson real estate recapitalization stephenson real estate company was founded 25 years ago by the current ceo

1 select company with a draw from the box containing all : 1. select company with a draw from the box containing all names of these companies. these names come from the

1 an investor bought 100 shares of omega common stock for : 1 an investor bought 100 shares of omega common stock for 9000. he held the stock for 9 years. for the first 4 years he

Affleck incs business is booming and it needs to raise more : affleck inc.s business is booming and it needs to raise more capital. the company purchases supplies on terms of 110

The simplex financial system is characterized by a required : the simplex financial system is characterized by a required reserves ratio of 11 percent initial excess reserves are 1

Judy johnson is choosing between investing in two treasury : judy johnson is choosing between investing in two treasury securities that mature in five years and have par values of

You are serving a jury a plaintiff is suing the city for : you are serving a jury. a plaintiff is suing the city for injuries sustained after a freak street sweeper accident. in

User Account

All Pages