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XYZ is a company located in Italy, the company manufactures machine parts. It is currently involved in making a decision concerning the acquisition of new machining tool. Two different versions of the tool are available: X AND Y. The forecasted cash flows of the two alternative are listed below; XYZ normally uses payback with a 3-year criterion. NET CASH FLOWS ($000s) Tool X Year 0 -1000, Year 1 +400, Year 2 +600, Year 3 +187, Tool Y Year 0 -450, Year 1+300, Year 2+150, Year 3+106. XYZ faces a perfect capital market, in which the interest rate for the projects' risk level is 5%. Required: (a) Using the Payback and the IRR decisions rule, indicate which projects the company should accept and state clearly the reasons for your decisions. (b) How would your conclusions in (a) will change if the projects were mutually exclusive? (c) State clearly any limitations and assumptions that you made in your calculations.
If 0.001 M of CO2 is introduced into a closed container which is full of pure water and has no headspace for air, what is the pH of the water solution
The current price of sugar is 15 cents per pound. The carrying cost of sugar is 0.10 cents per pound per month, to be paid at the beginning of the month. The risk-free interest rate applicable is 6% per annum. Find the forward price of a pound of sug..
Which one of the following comparisons between debt and equity is correct?
Compute the expected return given these three economic states, their likelihoods, and the potential returns:
As a general rule, the capital structure that maximizes firm value, or stock price also maximizes the expected rate of return on equity (ROE), maximizes the weighted average cost of capital (WACC)
Burnham & Company's $75.00 par-value preferred stock pays an annual dividend of $11.00. The stock has a beta of 0.85, the current T-bill rate is 2.40%, and the S&P 500's expected return (RM) is 11.30%. Assuming that CAPM holds, what is the intrinsic ..
The market data show that the last trade price is $52.57, current bid $52.63, and current ask is $52.70. Sara wants to buy the contracts no higher than $52.65 so she submitted a limit order at $52.65. will her order be executed immediately?
Compute the adjusted cash balance of the check register and the bank statement.?
A porfolio consists of 75% invested in Security A with an expected return of 35% and 25% invested in Security B with an expected return of 7%. Compute the expected return on the portfolio.
Inventory financing Raymond Manufacturing faces a liquidity crisis: It needs a loan of $100,000 for 1 month. Having no source of additional unsecured borrowing, the firm must find a secured short-term lender. The firm’s accounts receivable are quite ..
What is the smallest expected loss for your portfolio in the coming month with a probability of 16 percent?
Assume Chen and Beck are two Japanese firms of comparable size in the igloo building industry. Both have a 30% tax rate. Chen has zero debt, a beta of 1.2 and Beck has a beta of 1.5. Estimate Beck’s .debt-to-equity ratio.
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