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Rent-to-Own Equipment Co. is considering a new inventory system that will cost $750,000. The system is expected to generate positive cash flows over the next four years in the amounts of $350,000 in year one, $325,000 in year two, $150,000 in year three, and $180,000 in year four. Rent-to-Own's required rate of return is 8%.
a) Calculate the payback period of this project.
b) Calculate the net present value of this project.
c) Calculate the profitability index of this project.
d) Use Excel by following the formula as given in Chapter 9 for calculating the internal rate of return (IRR) and calculate it for this project.
e) Using your answers above, is this a financially-wise project to undertake? Why?
What is the total market value of the firm? Ignore taxes.
Describe existing and potential finance instruments/opportunities in order to start your internet gift shop. Explain which financing of funding opportunity you assume as the most realistic for your internet gift shop if you do not have your own money..
Estimate the beta for your equity if projects have constant betas, but your firm will carry a debt/equity ratio of 1/2.
Calculate the following values for a project that requires an initial investment of $38,370 and has equal annual cash inflows of $10,000 each year for the next 8 years. Assume a cost of capital of 14%. You must show your work within formulas.
Calculate the effective annual rate for this loan.
Billy’s Exterminators, Inc., has sales of $595,000, costs of $290,000, depreciation expense of $42,000, interest expense of $31,000, a tax rate of 35 percent, and paid out $42,300 in cash dividends. The firm has 94,000 shares of common stock outstand..
Suppose that the average annual return on the Standard and Poor's 500 Index from 1969 to 2005 was 14.8 percent. The average annual T-bill yield during the same period was 5.6 percent. What was the market risk premium during these 10 years?
A firm is expected to pay a dividend of $3.05 next year and $3.20 the following year. Financial analysts believe the stock will be at their price target of $65 in two years. Compute the value of this stock with a required return of 13.0 percent. (Rou..
Volbeat Corp. shows the following information on its 2015 income statement: sales = $251,000; costs = $156,000; other expenses = $7,900; depreciation expense = $18,400; interest expense = $14,400; taxes = $19,005; dividends = $11,500. What is the 201..
Simpson, Inc. is considering a five-year project that has an initial after-tax outlay or after-tax cost of $48,000. The respective future cash inflows from its project for years 1, 2, 3, 4 and 5 are: $15,000, $25,000, $35,000, $45,000 and -$70,000 (n..
Explain what is meant by principal and agent. Give examples of some of the conflicts between the agents and principals. Also, please explain two ways used to minimize this conflict?
Grummon Corporation has issued zero-coupon corporate bonds with a five-year maturity? (assume $ 100 face value bond).
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