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A 4-year financial project is forecast to have net cash inflows of $20,000; $25,000; $30,000; and $50,000 in the next 4 years. it will cost $75,000 to implement the project, payable at the beginning of the project. If the required rate of return is 0.2, conduct a discounted cash flow calculation to determine the NPV.
Now, however, assume that the new cash inflows are probabilistic variables. Further assume that each forecast net cash inflow is normally distributed with standard deviations of $1,000; $1,500; $2,000; and $3,500, respectively. Given a required rate of return of 0.2, find the mean forecast NPV using crystal ball (or Excel). What is the probability that the actual NPV will be positive?
STEPHENSON REAL ESTATE RECAPITALIZATION Stephenson Real Estate Company was founded 25 years ago by the current CEO, Robert Stephenson. The company purchases real estate, including land and buildings, and rents the property to tenants. The company has..
You purchase a 7 percent $1,000 bond with a term of ten years and reinvest all interest payments. If interest rates rise to 10 percent after you purchase the bond what is the return on your investment in the bond?
Robert Gillman, an equity research analyst at Gillman Advisors, believes in efficient markets. He has been following the mining industry for the past 10 years and needs to determine the constant-growth rate that he should use while valuing Pan Asia M..
A project will cost $4,819,724 and its expected to earn zero after one year, but $3,009,913 at the end of the second year, and $2,779, 333 at the end of the third year. and they generally want a return of 15% per year. Corporate tax rate is at 37%. I..
Suppose an investor would like to buy 200 Treasury notes. The investor wants notes with an annual coupon rate of 7%, a 3-year maturity, and semi-annual coupon payments. Assume each Treasury note has a par value of $1,000. Assuming the yield curve is ..
Gonzales Corporation generated free cash flow of $81million this year. For the next two years, the company's free cash flow is expected to grow at a rate of 9%. After that time, the company's free cash flow is expected to level off to the industry lo..
Familiarise yourself with the Anthonys Orchard company and its current situation; this can be done by exploring each of the tabs across the top of the screen in the Anthony's Orchard case study media.
What is the value of a bond that has a par value of $1000, a coupon rate of 15.67% (paid annually), and that matures in 7 years. Assume a required rate of return on this bond is 19.81%
Sports Corp has 11.5 million shares of common stock outstanding, 6.5 million shares of preferred stock outstanding, and 2.5 million bonds. If the common shares are selling for $26.5 per share, the preferred share are selling for $14.0 per share, and ..
Suppose the returns on large-company stocks are normally distributed. Also suppose large-company stocks had an average return of 12% and a standard deviation of 26.2%.
Due to a recession, expected inflation this year is only 3.25%. However, the inflation rate in Year 2 and thereafter is expected to be constant at some level above 3.25%. Assume that expectations theory holds and the real risk-free rate is r* = 2.75%..
What is the duration of assets that would be necessary to immunize the market value of equity from interest rate changes for this bank's portfolio holding the D1 constant and compute the slope of the Capital Market Line (CML) when the risk-free ra..
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