Five-year project has an initial fixed asset investment

Assignment Help Financial Management
Reference no: EM13976114

A five-year project has an initial fixed asset investment of $260,000, an initial NWC investment of $20,000, and an annual OCF of −$19,000. The fixed asset is fully depreciated over the life of the project and has no salvage value. If the required return is 10 percent, what is this project’s equivalent annual cost, or EAC?

Reference no: EM13976114

Questions Cloud

Ratios appears on a common-size balance sheet : Which of the following ratios appears on a common-size balance sheet? I. Debt to asset ratio II. Net working capital to total assets III. Net profit margin
Reduction in the cash account-payment of dividends : Which of following are sources of cash in a statement of sources and uses? I. Collection of accounts receivables II. Reduction of long-term debt III. Payment of dividends IV. Reduction in the cash account
What is the sustainable growth rate : A firm has a return on equity of 16 percent, a return on assets of 11 percent, and a 30 percent dividend payout ratio. What is the sustainable growth rate?
Security based on the capital asset pricing model : If there is a security with a negative beta, for example -0.5, what can you say about the expected return of the security based on the Capital Asset Pricing Model (CAPM), or the Security Market Line (SML)? Would it be greater or smaller than the risk..
Five-year project has an initial fixed asset investment : A five-year project has an initial fixed asset investment of $260,000, an initial NWC investment of $20,000, and an annual OCF of −$19,000. The fixed asset is fully depreciated over the life of the project and has no salvage value. If the required re..
Considering the sale of two non depreciable assets : Perkens manufacturing is considering the sale of two non depreciable assets, X and Y. Asset X was purchased for 1,800 and will be sold today or 2,240. Asset Y was purchased for 30,100 and will be sold today for 35,900. The firm is subject to a 40% ta..
Issues a two-year corporate bond : Mt. Langi issues a two-year corporate bond on 31 December, 2012 at the coupon rate of 10.5%, with a face value of $100 and interest paid semi-annually. What would be the market price of the Mt Langi 2-year bond one year prior to maturity?
How do dividends impact the value of a share of stock : Are there any instances in which companies should not pay dividends? How do dividends impact the value of a share of stock?
What price risks is still exposed to after taking position : It is now June. A company knows that it will sell 5,000 barrels of crude oil in September. It uses the October CME Group futures contract to hedge the price it will receive. Each contract is on 1,000 barrels of "light sweet crude." What position shou..

Reviews

Write a Review

Financial Management Questions & Answers

  What do investors require as a rate of return on this stock

Lake industries preferred stock has a par value of $100 and pays a dividend of $6.00 per share. it presently sells for $87 per share. What do investors require as a rate of return on this stock?

  Identify what type of position the bank should take to hedge

It is said that a micro hedge does not totally eliminate risk. Assume that a bank uses financial futures contracts to reduce the risk of rising rates on new borrowings. Identify what type of position the bank should take to hedge. Once a hedge is in ..

  What is firms weighted average cost of capital

Aaron's Rentals has long-term debt of $758,250, preferred stock of $612,000, and common stock of $2,088,000. The market rate on debt is 7.88%, the market rate on preferred stock is 11.76%, and the market rate on common stock is 7.48%. The tax rate is..

  Find equations for weights of the portfolio

Write system of equations for the 2nd Markovitz problem: given n assets and correlations between them and given a sigma, find equations for weights of the portfolio which maximize the mean return with a given sigma. You need to use Lagrange multiplie..

  Banks want IFC involved with the deal of mozal project

Why do the sponsors and the banks want IFC involved with the deal of mozal project? What does IFC bring to the deal? Will IFC and the sponsors (Alusaf and IDC) share similar objectives?

  Payback period for a project with an initial investment

What is the payback period for a project with an initial investment of $180,000 that provides annual cash inflow of $40,000 for the first three years and $25,000 per year for years four and five, and $50,000 per year for years six through eight?

  Respect to these interest and dividend payments

USAco derives over 90 percent of its gross income from its business operations in Canada. Are there any U.S. withholding requirements with respect to these interest and dividend payments? A citizen and resident of Country X hold a certificate of depo..

  Calculate the equivalent uniform annual worth of the machine

A machine costs $73,000 initially and will have a salvage value of $10,000 after 9 years. It will also have an operating cost of $21,000 in year 1, with 5% continuing increases each year thereafter to year 9. The MARR is 19% per year. Compute the Equ..

  Expected rate of return of both stocks using dividend growth

What are the required rates of returns on both stocks using the CAPM model? What are the expected rates of return of both stocks using the dividend growth model. Which stock would you recommend to purchase or sell? Why?

  Current estimated value and growth rate

Last Year's Dividend (Do) $2.80. Growth rate for year 1 (g1) 25%. Current Estimated Value (Po) = If the stock was currently selling for $50, would you buy it yes or no?

  Bond yields and rates of return

A 25-year, 8% semiannual coupon bond with a par value of $1,000 may be called in 4 years at a call price of $1,100. The bond sells for $950. What is the bond's yield to maturity? What is the bond's current yield? What is the bond's yield to call?

  Firm must pay on a new issue of long-term debt

If the firm makes it's debentures subordinate to it's bank debt, what will the effect be on the average cost of total debt. What effect does this have on the interest rate that a firm must pay on a new issue of long-term debt. Why does it have such a..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd