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The Drillago Company is involved in searching for locations in which to drill for oil. The firm's current project requires an initial investment of $15 million and has an estimated life of 10 years. The expected future cash inflows for the project are as shown in the following table. Year Cash Inflows 1 $600,000 2 1,000,000 3 1,000,000 4 2,000,000 5 3,000,000 6 3,500,000 7 4,000,000 8 6,000,000 9 8,000,000 10 12,000,000 The firms current cost of capital is 13% Using Excel and explain what to enter in cell (calculation) A. Calculate the project's net present value (NPV). Is the project acceptable under the NPV technique? Explain B. Calculate the project's internal rate of return (IRR). Is the project acceptable under the IRR technique? Explain C. In this case, did the two methods produce the same results? Generally, is there a preference between the NPV and IRR techniques? Explain D. Calculate the payback period for the project. If the firm usually accepts projects that have payback periods between 1 and 7 years, is this project acceptable?
Goodwin Technologies, a relatively new company, has been wildly successful but has yet to pay a dividend. An analyst forecasts that Goodwin is likely to pay its first dividend three years from now. "Investors prefer the deferred tax liability that ca..
Identify all the important stakeholders for the entity.
Car dealers are trying a number of promotional methods to induce car sales. One dealer offers a year’s supply of free gas to any consumer who buys a car during the month of July. Calculate the present value of the gas promotion
Assume that you hold a well-diversified portfolio that has an expected return of 11.0% and a beta of 1.20. You are in the process of buying 1,000 shares of Alpha Corp at $10 a share and adding it to your portfolio. Alpha has an expected return of 20...
Lang Industrial Systems Company (LISC) is trying to decide between two different conveyor belt systems. System A costs $244,000, has a four-year life, and requires $76,000 in pretax annual operating costs. System B costs $342,000, has a six-year life..
With celebrity bonds, celebritties raise money by issuing bonds to investors. the royalties from sales of the music are used to pay interest and principal on the bonds. In april of 2009, EMI announced that it intended to securitize its back catalogue..
BLW Corporation is considering the terms to be set on the options it plans to issue to its executives. Which of the following actions would decrease the value of the options, other things held constant? The exercise price of the option is increased. ..
A business entity operated and taxed like a partnership, but with limited liability for the owners, is called a: A. limited liability company. B. general partnership. C. limited proprietorship. D. sole proprietorship. E. corporation.
You find a bond with 25 years until maturity that has a coupon rate of 10.0 percent and a yield to maturity of 8.5 percent. Suppose the yield to maturity on the bond increases by .25 percent. What is the new price of the bond using duration?
You have $36,400 on deposit with no outstanding checks or uncleared deposits. One day you write a check for $6,300 and then deposit a check for $4,700. What are your disbursement, collection, and net floats?
The Swiss House is a maker of high quality chocolates. The company is considering opening retail outlets. Mgt feels that retailing involves a different set of risks than it's current production operations and is therefore concerned about using the co..
A second way to assess the 100-year bond is to consider a $100m 30 year issue with a 5% rate. The present value of this cash flow stream is $100m, using a 5% discount rate. Suppose you use 5% as the discount rate to assess the present value of the ca..
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