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Your firm's geologists have discovered a small oil field in New York's Westchester County. The field is forecasted to produce a cash flow of C1= $2 million in the first year.
You estimate that you could earn an expected return of r= 12% from investing in stocks with a similar degree of risk to your oil field. What is the present value? The answer, of course, depends on what happens to the cash flows after the first year. Calculate present value for the following cases:
a. The cash flows are forecasted to continue forever, with no expected growth or decline.
b. The cash flows are forecasted to continue for 20 years only, with no expected growth or decline during that period.
c. The cash flows are forecasted to continue forever, increasing by 3% per year because of inflation.
d. The cash flows are forecasted to continue for 20 years only, increasing by 3% per year because of inflation.
The firm now has the option of investing $20 million in developing a new seismic test which will increase the informativeness of the prospecting.
Calculate the after tax cash flows for the project for each year. Explain the methods used in your calculations. If the discount rate were 6 percent calculate the NPV of the project. Is this an economically acceptable project to undertake? Why or why..
what do you understand by time value of money. respond with at least 200 words using relevant
In the year of 1985, a given Japanese imported automobile sold for 1,476,000 yen, or $8,200. If the car still sold for same amount of yen today but the current exchange rate is 144 yen per dollar
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snider industries sells on term of 210 net 45. total sales for the year are 1500000. thirty percent of customers pay on
An investment project requires a net investment of $100,000 and is expected to generate annual net cash inflows of $25,000 for 6 years. The firm's cost of capital is 12 percent. Determine the profitability index for this project.
Assuming a stock price and volume chart that also contains a 50-day and a 200-day MA line, describe a bearish pattern with the two MA lines and discuss why it is bearish.
1. describe a call option on interest rate futures. how does it differ from purchasing a futures contract?2. describe a
The company's cost of capital is 11%. What is the NPV (on a 6 yr extended basis) of the system that adds the most value? Answer choices: $17,298.30 or $22,634.77 or $31,211.52 or $38,523.43 or $46,143.21
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