User Account

All Pages

Should the firm make investment

Assignment Help Financial Management
Reference no: EM131349211

1. A firm is evaluating a proposal which has an initial investment of $50,000 and has cash flows of $16,000 per year for five years. Calculate the payback period of the project. If the firm’s maximum acceptable payback period is 3 years, should the firm accept the project?

2. Tangshan Mining Company is considering investing in a new mining project. The firm’s cost of capital is 12 percent and the project is expected to have an initial cost of $5,000,000. Furthermore, the project is expected to provide after-tax operating cash flows of $2,500,000 in year 1, $2,300,000 in year 2, $2,200,000 in year 3 and $1,000,000 in year 4

(a) Calculate the project’s NPV.

(b) Should the firm make the investment?

3. A firm is evaluating two projects X and Z. Project X has an initial investment of $80,000 and cash inflows at the end of each of the next five years of $25,000. Project Z has a initial investment of $120,000 and cash inflows at the end of each of the next five years of $40,000. Assume the cost of capital of 9%. Which project(s) should the firm accept if

a) projects X and Z are independent?

b) projects X and Z are mutually exclusive?

Reference no: EM131349211

Questions Cloud

Importance of financial ratios in healthcare organizations : What is the importance of financial ratios in healthcare organizations? What key factors should organizations keep track of in financial ratios?
Find the pulling force of the man : A man pulls a suitcase from its handle, making an angle of 45 degress above the horizontale. While moving the suitcase horizontally over a distance of 40 m, 820 J of work are done by the man on the suitcase. Find the pulling force of the man.
Describe the remedies that should be available : PAD 525- Analyzing Brunoli, Inc. v. Town of Bradford, identify and then describe the remedies that should be available. Explain which you would recommend to be the best remedy for both parties.
Familiarity of organizations in the marketplace : Based on your research and familiarity of organizations in the marketplace, find an example of an organization that you believe practice proactive marketing and another organization that you believe utilizes reactive marketing.What are some of the..
Should the firm make investment : A firm is evaluating a proposal which has an initial investment of $50,000 and has cash flows of $16,000 per year for five years. Calculate the payback period of the project. If the firm’s maximum acceptable payback period is 3 years, should the firm..
Determine the largest p : A machine operator produces the tension T in the control rod by applying the force P to the foot pedal. Determine the largestPif the magnitude of the pin reaction atBis limited to 1.8 kN. Neglect the mass of the mechanism.
Write a response about the given post : Do you agree with your classmates' perspectives? Why, or why not? Be specific.Ask a specific question to encourage further discussion on the topic.Challenge your classmates' interpretation of literature and/or point of view.
Discuss and persuade the audience of your position : AD 525- Make an argument for or against the statute. Discuss and persuade the audience of your position as a public administrator for or against it.
Find after-tax return to corporation : Find the after-tax return to a corporation that buys a share of preferred stock at $40, sells it at year-end at $40, and receives a $4 year-end dividend. The firm is in the 30% tax bracket.

Reviews

Write a Review

Financial Management Questions & Answers

  Total net payoff that you will receive from each warrant

Saunders Corporation currently has 1,000,000 common stocks outstanding. It considers raising $10 million through issuing 20-year 6.7% coupon bonds – annually paid - with 18 warrants. If you decide to exercise your warrants at Year 10. What is the tot..

  Manufacturing plant-find the rate of return

You are considering an upgrade at a chip manufacturing plant. A new VLSI testing station costs $100,000, installed. It will save $50,000 per year in labor costs. Use five-year tax life and a tax rate of 40%. Find the rate of return (IRR)

  Change the interest rate in small increments

If you save $165/mo. for the next 42 years at 12.5% how much will you have at the end of 42 years? If you borrow $105,000 to buy a house at 6.75% what will be the monthly payment on a 30 year mortgage? How much will you have to save per month at 11.5..

  What will be the effect on profit of accepting the order

PowerDrive, Inc. produces a hard disk drive that sells for $175 per unit. The cost of producing 25,000 drives in the prior year was: Direct material $625,000 Direct labor 375,000 Variable overhead 125,000 Fixed overhead 1,500,000 Total cost $2,625,00..

  Capital budgeting techniques discussed

Of the capital budgeting techniques discussed, which works equally well with normal and non-normal cash flows and with independent and mutually exclusive project?

  What are the semi-annual yields to maturity of the two bonds

Suppose you have the choice of investing in (A) a zero-coupon bond, which costs $500 today, pays no coupon during its life, compounds semi-annually, and then pays $1,000 after 10 years, or (B) a bond which costs $1,100 today, pays $45 in interest sem..

  Corporation is considering issuing long-term debt

A corporation is considering issuing long-term debt. the debt would have a 30 year maturity and a 10 percent coupon rate and annual payments. the bonds will be sold for $950. additionally, the firm would have to pay floatation costs of 5 percent. the..

  Calculate her commission on the sale

Mary works as a full-service broker at a firm that charges $75 a trade plus 10 cents per share for the broker's services. Calculate her commission on the sale of 700 shares of stock at $26 per share.

  How much of their assets are financed with equity

Debt Management Ratios Zoe's Dog Toys, Inc. reported a debt to equity ratio of 2.10 times at the end of 2008. If the firm's total assets at year-end were $49.5 million, how much of their assets are financed with equity?

  Equal weighting scheme to an optimal weighting scheme

An investor has designed a risky portfolio based on two stocks, A and B. The standard deviation of return on stock A is 20% while the standard deviation on stock B is 30%. The correlation coefficient between the return on A and B is 0.25. If the inve..

  What is the open interest on this exchange

Imagine only 1 stock trades on an exchange with 10 traders that buy and sell. The share price of the stock is $150 with 10 million shares outstanding. Five trades sell 1 options contract each at $4 per option contract. What is the market value of the..

  Compute the weighted-average cost of capital for firm

Compute the weighted-average cost of capital for a firm with the following sources of funds and corresponding required rates of return: $5 million common stock at 16%, $500,000 preferred stock at 10%, and $3 million debt at 9%. All amounts are listed..

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

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