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Sensitivity analysis James Secretarial Services is considering the purchase of one of two new personal computers, P and Q. Both are expected to provide benefits over a 10-year period, and each has a required investment of $3,000. The firm uses a 10% cost of capital. Management has constructed the following table of estimates of annual cash inflows for pessimistic, most likely, and optimistic results. Computer P Computer Q Initial investment (CF0) $3,000 $3,000 Outcome Annual cash inflows (CF) Pessimistic $ 500 $ 400 Most likely 750 750 Optimistic 1,000 1,200 a. Determine the range of annual cash inflows for each of the two computers. b. Construct a table similar to this for the NPVs associated with each outcome for both computers. c. Find the range of NPVs, and subjectively compare the risks associated with purchasing these computers.
indirect effects on project cash flow1. nbspprovide an example of a sunk cost from your firm.2. nbspprovide an example
Briefly but carefully distinguish between Stand-alone risk, diversifiable risk, and market risk. Of the three measures, which one is most relevant for stock valuation? Why?
Suppose an investment offers to quadruple your money in 12 months (don’t believe it). What rate of return per quarter are you being offered? (Round your answer to 2 decimal places. (e.g., 32.16))
Hare Enterprises has 1.5 million shares of common stock outstanding and the only debt on their balance sheet consists of 50,000 of the 5% coupon bonds listed above
Compare the performance of Fidelity Freedom 2010 Fund to the performance of Fidelity Freedom 2040 Fund. Explain the reasons for the difference in portfolio performance. Discuss what this suggests relating to your investments.
Evaluate project that costs $1.5 million has a 10-year life and no salvage value. Assume depreciation is straight line over the life of the project. Sales are projected at 150K units every year over the life of the project. Price per unit is $75, var..
The contract size for platinum futures is 50 troy ounces. Suppose you need 500 troy ounces of platinum and the current futures price is $1,265 per ounce. How many contracts do you need to purchase? How much will you pay for your platinum? What is you..
The demand for housing is often described as being highly cyclical and very sensitive to housing prices and interest rates. Given these characteristics, describe the effect of each of the following in terms of whether it would increase or decrease th..
nfec use the last two fiscal years financial statements of the publicly-traded company you selected and calculate the
Mary Watson is 24 years old and single lives in an apartment and has no dependents. Last year she earned 45,000 as a sales assistant for focus to business analytics: $3910 of her wages was withheld for federal income taxes. In addition, she had inter..
suppose you owned a portfolio consisting of 250000 worth of long-term u.s. government bonds.a. would your portfolio be
The average cost of a certain model car was $18,000 ten years ago. This year the average cost is $30,000. calculate the average monthly inflation rate fm for this model.
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