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Fresh off the excitement of the 2012 London Olympic Games, you decide that you want your firm to take advantage of the profits to be made for the 2016 games in Rio de Janeiro. To do so you plan to open a factory in Brazil. After examining the idea, your CFO projects revenues next year (2013) to be $15 million and costs to be $7 million. Both of these are expected to grow at a rate of 22.0% per year as the excitement for the games builds. Your firm faces a 35% tax rate, a 13.5% discount rate and you can depreciate your new investment using the straight line method over the four years leading up to the games, at which point the value of the venture moving forward will be $7 million. This $7 million is the after-tax terminal value that is in year 4 (that is, 2016) dollars and is the PV of all cash flows year 5 and beyond. The capital expenditure of this project is $11 million. What is the NPV of the project? Assume that you have no significant working capital costs. (You are strongly encouraged to use a spreadsheet.) (Enter just the number in dollars without the $ sign or a comma and round off decimals to the closest integer, i.e., rounding $30.49 down to $30 and rounding $30.50 up to $31.)
An asset with a first cost of $30,000 has been depreciated by the straight line method at $4,000 per year. If the asset's depreciable life was five years, the salvage value used in calculating the depreciation was closest to:
For what range of 1-year forward prices of gold does the trader have no arbitrage opportunities? Assume there is no bid-offer spread for forward prices.
Provide and interpret an estimate of the cost of capital (expected return) for Carlson’s equity investment in the widget business.
Expected return A stock's returns have the following distribution: Demand for the Company's Products Probability of This Demand Occurring Rate of Return If This Demand Occurs Weak 0.1 -24% Below average 0.1 -9 Average 0.4 11 Above average 0.3 20 Stro..
In which situation would a partnership be required to complete Schedules L, M-1 and M-2 on page 5 of form 1065?
A firm in truely competitive industry is confronted with an EQ price of $5, its marginal revenue:
Trigen Corp. management will invest cash flows of $331,000, $616,450, $212,775, $818,400, $1,239,644, and $1,617,848 in research and development over the next six years. If the appropriate interest rate is 6.75 percent, what is the future value of th..
What is the current market price (intrinsic value) of the bonds?
Accounts receivable represents credit sale, and thus, cannot be collected until maturity. Accounts receivable mainly consists of promissory notes and credit sales. Accounts receivable is part of the current assets.
Once financial statements are made public, the external analysis of the company begins by. __ employer businesses (businesses that employ others besides the owners) will close within the first six years
The expected return for the general market is 13.0 percent. Tasaci, LBM and Exxos have betas of 0.896,0.651 and 0.598 respectively. What are the appropriate expected rates of return for the three securities?
A pension fund that begins with $500,000 earns 15% the first year and 10% the second year. At the beginning of the second year, the sponsor contributes another $300,000. Calculate the IRR (dollar weighted return) using a financial calculator and show..
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