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A company is considering a 3-year project that requires an initial installed equipment cost of $16,000. The project engineer has estimated that the operating cash flows will be $3,000 in year 1, $7,000 in year 2, and $9,000 in year 3. The new machine will also require a parts inventory of $2,000 at the beginning of the project (assume this inventory can be sold for cost at the end of the project). It is also estimated that the equipment can be sold as salvage for an after tax salvage cash flow of $6,000 at the end of the project. If the tax rate is 26% and the required rate of return is 18%, what is the net present value (NPV) of this project? (Answer to the nearest dollar.)
What are the conditions that affect the success or lack of success in cross border acquisitions by multinational corporations? Give an example
What is the Macaulay duration of a 5.6 percent coupon bond with ten years to maturity and a current price of $1,057.70? What is the modified duration? (Do not round intermediate calculations. Round your answers to 3 decimal places.)
Percy Motors has a target capital structure of 40% debt and 60% common equity, with no preferred stock. The yield to maturity on the company’s outstanding bonds is 9%, and its tax rate is 40%. Percy’s CFO estimates that the company’s WACC is 9.96%. W..
Assume that annual returns on small-company stocks are normally distributed with an average historical return of 17.1% and a standard deviation of 32.6%. What is the probability that annual return on small-company stocks is positive? Show all work.
Genetic Insights Co. purchases an asset for $11,576. This asset qualifies as a seven-year recovery asset under MACRS. The seven-year fixed depreciation percentages for years 1, 2, 3, 4, 5, and 6 are 14.29%, 24.49%, 17.49%, 12.49%, 8.93%, and 8.93%, r..
You’re trying to save to buy a new $235,000 Ferrari. You have $40,000 today that can be invested at your bank. The bank pays 4.7 percent annual interest on its accounts. How long will it be before you have enough to buy the car?
Assume the rate on the issuance of $100m of 100-year bonds is 7.5%; the annual debt service payment would be $7.505m. How high would the interest rate have to be on 30-year bonds for the annual debt service payment to be the same for both financings?
Five years ago, Midway Community Hospital issued 20-year municipal bonds with a 9 percent annual coupon rate. The bonds were called today for a $90 call premium – that is, bondholders received $1,090 for each bond. What is the realized rate of return..
Assume that you want the estimate to be incorrect at most 10 percent of the time.
Explain the concept of return on investment (ROI) and the two differ¬ent approaches to measuring ROI and what is the difference between a lump sum, an annuity, and an un¬equal cash flow stream?
A factory forecasts to produce the following cash flows: Year 1 - $6516, Year 2 - $7000, Year 3 - $11400, Year 4 onward in perpetuity - $12000. If the cost of capital is 6%, what is the factory's present value?
Suppose a stock fund has an annual expected return of 10%. If you assume annual stock fund returns are normally distributed, approximately how big can its standard deviation be before your annual probability of loss exceeds 16.67%?
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