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The Ewert Exploration Company is considering two mutually exclusive plans for extracting oil on property for which it has mineral rights. Both plans call for the expenditure of $11 million to drill development wells. Under Plan A, all the oil will be extracted in 1 year, producing a cash flow at t = 1 of $11.5 million; under Plan B, cash flows will be $1.5 million per year for 20 years.
What are the annual incremental cash flows that will be available to Ewert Exploration if it undertakes Plan B rather than Plan A? (Hint: Subtract Plan A's flows from B's.) Enter your answers in millions. For example, an answer of $1.23 million should be entered as 1.23, not 1,230,000. Round your answers to two decimal places. Use a minus sign to enter cash outflows, if any. Year Incremental Cash Flow (B - A)
1 $ ________ million
2-20 $_________ million
If the company accepts Plan A and then invests the extra cash generated at the end of Year 1, what rate of return (reinvestment rate) would cause the cash flows from reinvestment to equal the cash flows from Plan B? Round your answer to two decimal places.
Explain the importance of INTERAL CONTROLS programs and identify effective INTERNAL CONTROL TECHNIQUES?
Suppose the projections given for price, quantity, variable costs, and fixed costs are all accurate to within ±10 percent.
1) There is no "formula" for maturity model. A six month treasury bill's maturity is 0.5 year and the maturity for a five year loan is, 5years. In the case of the maturity of asset/liability:
Bond J is a 3 percent coupon bond. Bond K is an 11 percent coupon bond. Both bonds have 9 years to maturity, make semiannual payments, and have a yield.
1. Report the dividend payments over the last three years 2. Calculate the dividend payout and dividend yield
Bob Johnson is considering the purchase of one of the following bonds: a 5% annual coupon municipal bond or a 8% annual coupon corporate bond.
What is meant by "structured insurance"?- What is an alternative name for structured insurance? - Give two examples of structured insurance.
What are some examples of why companies need long term financing (how might they use the funds)? What are the possible issues that can arise.
What is market value of the ten-year loan if all market interest rates increase by 2 percent?
What is the future value of 1000 placed in a savings account for four years if the account pays 8 percent compounded quarterly?
Gemco Jewellers earned $ 5 million in after-tax operating income in the most recent year. The firm also had capital expenditures of $ 4 million.
Reported $9,000 of sales, $6,000 of operating costs other than depreciation, and $1,500 of depreciation. The company had no amortization charges, it had issued $4,000 of bonds that carry a 7 percent interest rate,
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