Impressed with new packaging technology developed

Assignment Help Financial Management

Reference no: EM131513318

A major semiconductor manufacturer is impressed with a new packaging technology developed at the University of Maryland. To block their competitor from getting the new technology, the semiconductor manufacturer purchased an exclusive license from the University of Maryland for $30 million. The semiconductor manufacturer figures that they will have to spend an additional $100 million to implement the new technology, BUT, their decision whether to move forward or not depends on what their competitor does in the next year. On the upside, if implemented, the new technology could increase the value of the semiconductor manufacturer’s project by 50% (u = 1.5). If the riskless rate is 5%/year and assuming that d=1/u, what does the semiconductor manufacturer think the present value of the project must be?

Reference no: EM131513318

Questions Cloud

Calculate the required rate of return : Calculate the required rate of return for Mudd Enterprises assuming that investors expect a 3.7% rate of inflation in the future.

What is the required rate of return on stock with beta : Assume that the risk-free rate is 4% and the required return on the market is 11%. What is the required rate of return on a stock with a beta of 1.2?

What are the risks if a bank increases its leverage : How is a banks return on equity influenced by leverage? What are the risks if a bank increases its leverage?

What will cash flows for this project be : If your cost of capital is 10 percent and your firm faces a 34 percent tax rate, what will the cash flows for this project be?

Impressed with new packaging technology developed : A major semiconductor manufacturer is impressed with a new packaging technology developed at the University of Maryland.

Percentage of earnings will result in lower growth rate : Retaining a higher percentage of earnings will result in a lower growth rate.

Linear cost functions and cost estimation methods : Explain the Linear Cost Functions and Cost Estimation Methods

What are portfolio weights of each stock : What are the portfolio weights of each stock?

Difference between required return and dividend growth rate : Dividends are divided by the difference between the required return and dividend growth rate as follows:

User Account

All Pages