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A firm is considering a new project in a market with 20 % Corporate Tax rate, which requires an initial investment in equipment of 90,000 and also an initial investment in working capital of 10,000 (at t = 0). You expect the project to produce sales revenue of 120,000 per year for three years. You estimate manufacturing costs at 60% of revenues. (Assume all revenues and costs occur at year-end) The equipment fully depreciates using straight-line depreciation over three years. At the end of the project, the firm can sell the equipment for 10,000 and also recover the investment in net working capital.
A. Find the project's payback period, IRR, NPV and profitability index.
B. Should the company invest in the project? Explain.
C. Does your decision in (b) depend on the way the project is financed? If so, how?
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His health insurance plan had a $500 annual deductible and a 75/25 coinsurance provision. The cap on Michael's coinsurance share is $2000.
A risk-free asset currently earns 5.1 percent. If a portfolio of the two assets has a beta of 1.06, what are the portfolio weights?
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