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Facebook is considering two proposals to overhaul its network infrastructure. They have received two bids. The first bid from Huawei will require a $ 23 million upfront investment and will generate $ 20 million in savings for Facebook each year for the next 33 years. The second bid from Cisco requires a $ 80 million upfront investment and will generate $ 60 million in savings each year for the next 33 years. a. What is the IRR for Facebook associated with each bid? b. If the cost of capital for each investment is 14 % what is the net present value (NPV) for Facebook of each bid? Suppose Cisco modifies its bid by offering a lease contract instead. Under the terms of the lease, Facebook will pay $ 27 million upfront, and $ 35 million per year for the next 33 years. Facebook's savings will be the same as with Cisco's original bid. c. Including its savings, what are Facebook's net cash flow under the lease contract? What is the IRR of the Cisco bid now? d. Is this new bid a better deal for Facebook than Cisco's original bid? Explain.
a. What is the IRR for AOL associated with each bid? The IRR associated with the first bid from Huawei is nothing%. (Round to one decimal place.)
According to the put-call parity, the following condition must be met for the call price to be equal to the put price, when all the option factors are the same:
Calculate the weights of each stock in a price-weighted portfolio, a market value-weighted portfolio, and an equal-weighted portfolio.
Acme Anvil expects next year to have Before Tax profits of $1,000,000. It is considering purchasing a $300,000 machine which can be depreciated using MACRS as a 5-year asset. What is the anticipated after tax profit next year for Acme Anvil?
Other things equal, as the discount rate and the time increase, the future value? remains constant, also increase, decrease, becomes negative, ow will vary but the direction of the change remains unknown
What will be the change in the bond’s price in dollars and percentage terms?
An interest rate cap of 7% with a notational value of $18.9 million is available for a premium of 0.58%. The same notational value 3% floor is available for a premium of 0.64%. If current interest rates are at 8%, what would be the a financial instit..
Assume that the risk-free rate is 7% and the market risk premium is 4%. What is the expected return for the overall stock market? What is the required rate of return on a stock with a beta of 1.1?
One of your customers is delinquent on his accounts payable balance.
A capital investment project is estimated to have the following after-tax cash flows:
From a tax-paying investor's point of view, a stock repurchase: A. is equivalent to a cash dividend. B. is more desirable than a cash dividend. C. has the same tax effects as a cash dividend. D. is more highly taxed than a cash dividend. E. creates a..
The device will be used in five-year project but is classified as three-year MACRS property for for tax purposes.
Hickock Mining is evaluating when to open a gold mine. The mine has 41, 300 ounces of gold left that can be mined, and mining operations will produce 5, 900 ounces per year. The required return on the gold mine is 10 percent, and it will cost $33.9 m..
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