Reference no: EM131924102
Alessandro Florenzi Company (AFC) is considering a project to purchase a new equipment. The equipment would be depreciated by the straight-line method over its 3-year life and would have a zero-salvage value. The project requires investment of $6,000 today on net working capital, which will be recovered at the end of the third year when project is closed. Revenues and other operating costs are expected to be constant over the project's 3-year life. However, this project would compete with other company’s products and would reduce their pre-tax annual cash flows. The company can sell the equipment at the end of third year to generate $10,000 after tax cash flow. What is the project's MIRR?
Other information relevant to this project:
WACC 11.0%
Pre-tax cash flow reduction for other products -$5,000
Investment cost (depreciable basis) $80,000
Straight-line deprec. rate 33.333%
Sales revenues, each year for 3 years $67,500
Annual operating costs (excl. depreciation.) -$25,000
Tax rate 35.0%
Risk-free asset to replicate the payoff of the put option
: Please use binomial option pricing model to find the price of the put option. The put option matures in a year and has exercise price $30.
|
Review problem related to operating cash flow
: The 2008 balance sheet of Maria's Tennis Shop, Inc., showed $3 million in long-term debt, $770,000 in the common stock account, and $6.15 million.
|
Discuss internal controls of protecting shareholder rights
: In 2002, after the accounting deceptions of the management of many multi-million dollar corporations (with Enron being the benchmark name of that time period).
|
Find the yield rate for the new purchaser
: Suppose that the bond was issued January 15, 2000, and is bought by a new purchaser on April 1, 2005 for a market price of 112.225.
|
Considering project to purchase new equipment
: Alessandro Florenzi Company (AFC) is considering a project to purchase a new equipment. What is the project's MIRR?
|
How much value did management add to stockholders wealth
: For 2012, Everyday Electronics reported $22 million of sales and $18 million of operating costs (including depreciation). The company has $15 million.
|
Use the hamada equation to find hartman unlevered beta
: Which were financed with $4 million of debt and $4 million in equity.. Use the Hamada equation to find Hartman's unlevered beta, bU.
|
Was the major expansion the right idea
: In 2011, a small electric motor manufacturing company has 10 mm in interest bearing liabilities and 10 mm in stock holders equity. It generated 4.3 mm.
|
Formulate the present value of the annuity
: A 20-year annuity pays $1,800 per month, and payments are made at the end of each month. If the interest rate is 11 percent compounded monthly.
|