Reference no: EM131048219
You have an opportunity to invest in a business venture. It requires a $250,000 investment on January 1st. You will receive $70,000 in After-Tax Cash Flows per year on December 31st for 3 years.
At the end of 3 years, the project will be terminated, and all assets liquidated.
The net terminal value is $80,000.
Although the sum of all these cash receipts is $290,000, you realize that the Time Value of Money concept means that those future cash receipts are worth less in "today" dollars.
Therefore, for all investment opportunities, you use 10% to analyze the current (i.e., present) value of all future cash flows.
The Present Value factors at 10% are Yr 1 = 0.909, Yr 2 = 0.826, and Yr 3 = 0.751
|
Borrowing rates represent the borrowing rates the firms
: The above borrowing rates represent the borrowing rates the firms can obtain for a five year fixed rate debt issue in U.S. dollars or Swiss francs. Suppose XYZ wishes to borrow Swiss francs and LMN wishes to borrow U.S. dollars. LMN demands a 11 pct ..
|
|
What is the companys cost of equity capital
: David Ortiz Motors has a target capital structure of 40% debt and 60% equity. The yield to maturity on the company's outstanding bonds is 12%, and the company's tax rate is 40%. Ortiz's CFO has calculated the company's WACC as 9.58%. What is the comp..
|
|
Explain the effect on the hedging strategy
: European options to buy oil in one year at a price of $50 per barrel have a forward delta of 0.2. Assume BigOil Inc. is obligated to deliver 1.25 million barrels of crude oil one year from now at a fixed price of $45 dollars per barrel. Explain. As o..
|
|
What was the net convenience yield
: In January 201x, the spot price of crude oil was $47.50 a barrel and the one year futures price was $60.38 per barrel. The interest rate was about 0.15 percent. What was the net convenience yield? Interpret/explain that result.
|
|
The project will be terminated and all assets liquidated
: You have an opportunity to invest in a business venture. It requires a $250,000 investment on January 1st. You will receive $70,000 in After-Tax Cash Flows per year on December 31st for 3 years. At the end of 3 years, the project will be terminated, ..
|
|
Find the amount of the investment
: Suppose that an investment earning 6% interest compounded continuously has a balance of $4500 after 4 years. Find the amount of the investment as follows: Write an equation by using the given information in the compound continuous interest formula.
|
|
Why should commenting on videos be encouraged
: Why should commenting on videos be encouraged? What sort of personalisation would self-hosting of a video allow? How do you feel social media affects video marketing?
|
|
What is the terminal or horizon-value of operations
: Kendra Enterprises has never paid a dividend. Free cash flow is projected to be $80,000 and $100,000 for the next 2 years, respectively; after the second year, FCF is expected to grow at a constant rate of 5%. What is the terminal, or horizon, value ..
|
|
Describe why humans have a blind spot
: 2. Describe the functional and anatomic differences between rods and cones.3. Describe the trichromatic and opponent-process theories of color vision.
|