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Payback Compute the payback statistic for Project with the following cash flows:
Time
0 -$150,000
1 $6,000
2 $60,000
3 $70,000
4 $100,000
Deciding whether the firm should accept or reject the project with the cash flows shown above if the appropriate cost of capital is 8 percent and the maximum allowable payback is three years.
Compute NPV of the above project assuming cost of capital of 10 percent.
IRR Compute the IRR statistic for project in problem 1, and note whether the firm should accept or reject the project with the cash flows shown above if the appropriate cost of capital is 10 percent.
PI Compute the PI (profitability index) statistic for Project in problem 1 and advise the firm whether to accept or reject the project if the appropriate cost of capital is 10 percent.
Is your action ethical according to the categorical imperative perspective? Is your action ethical according to the utilitarian perspective?
Your firm is contemplating the purchase of a new $530,000 computer-based order entry system. If the tax rate is 34 percent, what is the IRR for this project?
What do you conclude about the speed of depreciation and the profitability of an investment?
Consider a four-year project with the following information: initial fixed asset investment = $420,000; straight-line depreciation to zero over the four-year life; zero salvage value; price = $25; variable costs = $16; fixed costs = $180,000; quantit..
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The McEnally Toy Corporation currently uses an injection molding machine that was purchased 2 years ago for $8,000.
Is the stock under- or overvalued at this price? What if the forward dividend growth rate is more aggressively assumed at 4.7 % ?
A stock price is currently $50. It is known that at the end of six months it will be either $60 or $42. The risk-free rate of interest with continuous compounding is 12% per annum. Calculate the value of a six-month European call option on the stock ..
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After graduating from college, you are hired by a company that offers a 401(k) retirement plan. You would like to save enough in this plan so that when you retire in 35 years you have an account balance of $1 million. You plan to make monthly contrib..
Miller, Inc., has declared a $6.30 per share dividend. Suppose capital gains are not taxed, but dividends are taxed at 10 percent. New IRS regulations require that taxes be withheld at the time the dividend is paid. Miller sells for $114 per share, a..
An investor can design a risky portfolio based on two stocks, A and B. The standard deviation of return on stock A is 24% while the standard deviation on stock B is 14%. The correlation coefficient between the return on A and B is 0.35. The expected ..
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