Solution-Determine the net present value of the project

Determine the net present value of the project

Assignment Help Finance Basics

Reference no: EM13892354

The DR motor car company has 100 shares of stock outstanding. The net earn- ings of the company are $5,000 per year, continuing forever. The firm announces that one year from now the company will have an opportunity to pay $1,000 to begin the con- struction of a new plant. One year after construction begins, the plant will generate addi- tional net earnings equal to $330/year. These additional earnings will continue forever.

Determine:

(a) The net present value of the project.

(b) The new equilibrium price of a share if the firm finances the project by issuing new shares when the construction of the plant begins.

Reference no: EM13892354

Questions Cloud

What is the net present value of the project : What is the sequence of payments that Captain Mo will receive from the project? What is the net present value of the project?

Distinguish between outsourcing and offshoring : 1. In two paragraphs, explain why a customer-centric Web site design is so important, yet is so difficult to accomplish. 2. In about two paragraphs, distinguish between outsourcing and offshoring as they relate to business processes.

What is separation between the two atoms in this molecule : A hypothetical NH molecule makes a rotational-level transition from l = 3 to l = 1 and gives off a photon of wavelength 1.780nm in doing so. What is the separation between the two atoms in this molecule if we model them as point masses?

Changing behavior of users represents biggest challenge : While IT provides the platform for this phenomenon, the changing behavior of users represents the biggest challenge and opportunity for businesses today. Web 2.0 also represents opportunities for those who understand and master the new way of doin..

Determine the net present value of the project : Determine The net present value of the project and The new equilibrium price of a share if the firm finances the project by issuing new shares when the construction of the plant begins.

Costs and benefits of growing gmo seed : Costs and Benefits of Growing GMO Seed

What is the purpose and role of the electoral college : What is the purpose and role of the electoral college as it relates to American Culture? Has it usurped our constitutional right to vote? How so?

What are the security implications of your choices : Use the study materials and engage in any additional research needed to fill in knowledge gaps. Write a 3 page paper that covers the following: What are the alternatives available to this small, single-site business for creation of an effective DMZ..

What is the equilibrium average rate of return on security k : What is the reward for waiting? What is the quantity of risk in Security K? According to the capital asset pricing model, what is the equilibrium average rate of return on Security K?

User Account

All Pages

Determine the net present value of the project

Reference no: EM13892354

Reference no: EM13892354

Questions Cloud

Reviews

Write a Review

Finance Basics Questions & Answers

Financial reporting and analysis

A report on financial accounting

Describe the types of financial ratios

Differences between sole proprietorship and corporation

Prepare a cash budget statement

What are the implied interest rates

State pricing theory and no-arbitrage pricing theory

Small business administration

Effect of financial leverage

Evaluate the basis for the payment to the lender

Importance of opps, ipps, mpfs and dmepos

Time value of money

Assured A++ Grade

Academics

Major Subjects

Majors

Get In Touch

TERMS & POLICIES

HELP & SUPPORT