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Ang Electronics, Inc., has developed a new HD DVD. If the HD DVD is successful, the present value of the payoff (at the time the product is brought to market) is $34.3 million. If the HD DVD fails, the present value of the payoff is $12.3 million. If the product goes directly to market, there is a 50 percent chance of success. Alternatively, Ang can delay the launch by one year and spend $1.33 million to test-market the HD DVD. Test-marketing would allow the firm to improve the product and increase the probability of success to 80 percent. The appropriate discount rate is 11 percent. Calculate the NPV of going directly to market and the NPV of test-marketing before going to market. (Enter your answers in dollars, not millions of dollars (e.g. 1,234,567). Do not round intermediate calculations and round your final answers to nearest whole dollar amount (e.g., 32).) NPV Go to market now $ Test-marketing first $ Should the firm conduct test-marketing? Yes No
How can you create a return on investment for the purchase of a new IT system that cost $1.5 million?
Sheep Shank Farms Ltd is considering extending the credit period offered to customers from 30 to 60 days. It is expected that customers will continue to pay on the net date. What additional profit contribution from sales will be realised from the pr..
Last year, Cayman Corporation had sales of $7,000,000, total variable costs of $3,000,000, and total fixed costs of $1,500,000. In addition, they paid $480,000 in interest to bondholders. Cayman has a 35% marginal tax rate. If Cayman's sales increase..
Assume the Black-Scholes framework. Consider a 9-month at-the-money European put option on a futures contract. If three months later the futures price is 17.7, what is the price of the put option at that time?
A fast-growing firm recently paid a dividend of $0.60 per share. The dividend is expected to increase at a 20 percent rate for the next four years. Afterwards, a more stable 12 percent growth rate can be assumed. If a 13.5 percent discount rate is ap..
The Board of Governors are elected for a 14-year non-renewable term. Do you think political pressure is actually eliminated?
Suppose that you are the president of a small commericial bank, Explain why this loan may potentially get your bank in to difficulty.
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New Business Ventures, Inc., has an outstanding perpetual bond with a coupon rate of 8 percent that can be called in one year. The bond makes annual coupon payments. The call premium is set at $100 over par value. what is the current market price of ..
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