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Hank Energy's executive jet is not fully utilized. Hank judges that its use by other officers would increase direct operating costs by only $21,000 a year and would save $100,000 a year in airline bills. On the other hand, Hank believes that with the increased use the company will need to replace the jet at the end of three years rather than four. A new jet costs $1.11 million and (at its current low rate of use) has a life of seven years. Assume that the Hank Energy does not pay taxes. All cash flows are forecasted in real terms. The real opportunity cost of capital is 9%.
A. Calculate the equivalent annual cost of a new jet.
B. Calculate the present value of the additional cost of replacing the jet one year earlier than under its current usage
C. Calculate the present value of the savings.
D. Should you try to persuade the president to allow other officers to use the plane?
How financial forecasting is essential to the strategic growth of a firm. Why are things like forecasting and projections important?
watch the concept review video working capital management video located in thewileyplus assignment week 3 videos
Find the present value of each stream using a 15% discount rate. Compare the calculated present values and discuss them in light of the fact that the undiscounted cash flows total $150,000 in eachcase.
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Compute the expected value of the return on the investment. Assume the time period involved is short.
five years ago you bought a 131000 building to house your business using a 25 year mortgage at 12 per year paid
Explain the Capital Budgeting process used in your work place. Please note this option requires either personal account or interview.
Fama's Llamas has a WACC of 10.2%. The company's costs of equity is 14%, and its pertax cost of debt is 8.4 percent.
Shara Miselle Co. just paid a dividend of $1.65 on it's common stock. This companys dividend are expected to grow at a constant rae of 3% indefinately. If the required rate of return on this stock is 11%, compute the current value per share of sto..
Hogs & Dawgs is an ice cream parlor on the border of north-central Louisiana and southern Arkansas that serves 43 flavors of ice creams, sherbets.
Stanley Hart invested in a municipal bond that promised an annual yield of 6.7%. The bond pays coupons twice a year.
Let's apply the Time Value Of Money concepts we have been working with to a personal financial scenario.
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