Considering a project with an initial cost

Assignment Help Financial Management
Reference no: EM131327354

Peter is considering a project with an initial cost of $42,000 and annual cash inflows of $9,100 a year for six years. What discount rate, when applied to this project, will produce a profitability index of 1.0?

Please explain using all formulas and calculator computations.

Reference no: EM131327354

Questions Cloud

What return should investors expect to earn on bonds : A firm's bonds have a maturity of 8 years with a $1,000 face value, have an 11% semiannual coupon, are callable in 4 years at $1,148, and currently sell at a price of $1,271.54. What is their nominal yield to maturity? What return should investors ex..
Calculate the monthly payment for a cpm loan : Calculate the monthly payment for a CPM loan.- What will the total of payments be for the entire 20-year period? Of this total, how much will be interest?
What is the relationship between hope and action : What is hope? What is the relationship between hope and action? What contributions does theology bring to understanding hope today? What is the relationship between hope and transformation
What is the new mortgage payment : Assuming he can reduce his monthly mortgage payments, what is the new mortgage payment?- Assuming the loan maturity is shortened and using the original monthly payments, what is the new loan maturity?
Considering a project with an initial cost : Peter is considering a project with an initial cost of $42,000 and annual cash inflows of $9,100 a year for six years. What discount rate, when applied to this project, will produce a profitability index of 1.0?
What is the value of lambco to wolfco : Wolfco management is currently considering a merger with Lambco. Both companies are in the same industry, and both companies’ shares sell at a ratio of price to free cash flow of 10. 3 Wolfco has 20 million shares outstanding, selling at a price of $..
Medical malpractice liability crisis : Here the estimated dollars per claim for each year have been adjusted to 2007 dollars to account for inflation, so the values are all compatible. Texas was said to have had a “medical malpractice liability crisis” starting in about 1998 and continuin..
What is the interest rate on the loan : A fully amortizing mortgage is made for $100,000 at 6.5 percent interest. If the monthly payments are $1,000 per month, when will the loan be repaid?
What must monthly payments be over the 10 year period : If the interest rate is 7 percent, what must monthly payments be over the 10-year period?- If the borrower chooses to repay the loan after 5 years instead of at the end of year 10, what must the loan balance be?

Reviews

Write a Review

Financial Management Questions & Answers

  Tendered for shares of common stock in the issuing firm

A convertible security may be tendered for shares of common stock in the issuing firm. In other words, the bonds or preferred stock may be converted to common stock. Result in new capital for the firm. Do not result in new capital for the firm.

  Stock dividend is expected to grow at constant rate

A stock’s dividend is expected to grow at a constant rate of 5 percent a year. W

  Simple interest on its investment accounts

First Simple Bank pays 8.8 percent simple interest on its investment accounts. First Complex Bank pays interest on its accounts compounded annually. Required: What rate should the bank set if it wants to match First Simple Bank over an investment hor..

  Find the market value of shares when dividends

Lawrence Industries' most recent annual dividend was $2.09 per share, and the firm's required return is 16%. Find the market value of Lawrence's shares when dividends are expected to grow at 20% annually for 3 years, followed by a 4% constant annual ..

  Would reinvest the funds by buying us treasury securities

Would the Fed be more likely to take this action if it saw future U.S. economic growth as being strong or as being weak? Briefly explain.

  Composite index peaked at a level

In February of 2000 the NASDAQ Composite index peaked at a level of 4,698 ?(just before the Tech Bubble?popped). In February of 2006 it was at a level of 2,012. The NASDAQ index has historically grown at an average annual rate of 9.5%. How many years..

  What is the after-tax return on municipal bonds

Municipal bonds are currently offering investors a 6% return and corporate bonds with the same maturity and default risk are offering investors an 8% return. What is the after-tax return on municipal bonds for an investor in the 30% tax bracket?

  What must the expected return on this stock be

A stock has an expected return of 13.7 percent, the risk-free rate is 2.4 percent, and the market risk premium is 9.9 percent. What must the beta of this stock be? A stock has a beta of 1.25, the expected return on the market is 15 percent, and the r..

  Different possible spot rates at option maturity

Consider a PUT option on euros with a strike price of $1.05/€ and an option premium of 8 cents per euro. Calculate the profit (net of the cost of the option) to the holder of the option for the following different possible spot rates at option maturi..

  What is the cost of debt for the firm

A company has 10,000 6 percent, 10-year bonds outstanding, with a face value of $1,000, currently trading at 102 percent of face value. The bonds pay interest semiannually. What is the cost of debt for the firm?

  Share liquidating dividend-what is current value of stock

JJ industries will pay a regular dividend of $2.40 per share for each of the next four years. At the end of the four years, the company will also pay out a $40 per share liquidating dividend, and the company will cease operations. If the discount rat..

  What is the average inventory held during the year

Appliance for Less is a local appliance store. It costs this store $18.85 per unit annually for storage, insurance, etc., to hold microwave in their inventory. Sales this year are anticipated to be 765 units. Each order costs $91. The company is usin..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd