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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 $5,000 in year 1, $6,000 in year 2, and $8,000 in year 3. The new machine will also require a parts inventory of $3,000 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 32% and the required rate of return is 14%, what is the net present value (NPV) of this project?
Cash equation. Sunset, inc., has a book value of equity of $13,205. Long-term debt is $8,200. Net working capital, other than cash, is $2,205. Fixed assets are $18,380. How much cash does the company have? If current liabilities are $1,630, what are ..
What will my financial position be after the stock split, compared to my current position? ( Hint: Assume the stock price falls proportionately.). You want to look out for the small shareholders. If someone owns 100 shares, do you think he would pref..
Do you believe there are any ethical considerations in slowing payments to your suppliers for the sake of increasing your company's bank balances?
Demand for an item is 100 units a week with a standard deviation of 10 units. Lead time is one week and the reorder level used is 115 units. What is the probability of running out of stock?
Evaluate a project that costs $1.75 million has a 10-year life and no salvage value. Assume depreciation is straight line over the life of the project. Sales are projected at 155K units every year over the life of the project. Calculate: the accounti..
Consider the following table, which gives a security analyst's expected return on two stocks for two particular market returns: What are the betas of the two stocks? What is the expected rate of return on each stock if the market return is equally li..
L web is bidding to provide web services for a company. The company pays its current provider $10,000 per year for hosting its web page, handling transactions, etc. If L web's cost of capital is 9.9%, can it bid less than $10,000 per year to provide..
A stock is expected to pay the following dividends: $1.30 4 years from now, $1.60 5 years from now, and $1.90 6 years from now, followed by growth in the dividend of 8% per year forever after that point. There will be no dividends prior to year 4. Th..
Calculate the current return on a stock of your choice and compare it to returns on bonds. Which is better to invest in presently a stock or a bond in this company and why? Please explain
Nero Violins has the following capital structure: What is the firm's asset beta? Assume that the CAPM is correct. What discount rate should Nero set for investments that expand the scale of its operations without changing its asset beta? Assume a ris..
The Walgreen Corporation is contemplating a new investment that it plans to finance using one-third debt. The firm can sell new $1000 par value bonds with a 15 year maturity at a price of $950 that carries a coupon interest rate of 12.9 percent that ..
Consider the following information about three stocks: Rate of Return If State Occurs State of Probability of Economy State of Economy Stock A Stock B Stock C Boom .22 .30 .42 .58 Normal .46 .23 .21 .19 Bust .32 .01 −.22 −.50 a-1 If your portfolio is..
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