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You are offered an asset that costs $14,000 and has cash flows as follows below at the end of each quarter for the next 8 years. Then it will be sold for $2,500. Your cost of capital is 6.5 percent. An alternative (mutually exclusive) project is available which offers an accounting rate of return of 8%, a classical payback period of 5 years and a discounted payback period of 5 years. Year 1: $800 each quarter Year 2: $850 each quarter Year 3: $850 each quarter Year 4: $950 each quarter Year 5: $800 each quarter Year 6: $600 each quarter Year 7: $500 each quarter Year 8: $400 each quarter a) What is the IRR of the asset? b) What is the NPV of the asset? c) What are the PI and NPI of the asset? d) What are the classical and discounted payback periods? e) What are the four accounting rate of returns (utilizing cash flows)? f) Should you purchase it? Base your answer on your solutions to parts a through e a and b (IRR and NPV) and explain why. (Use your calculator to make sure that the answers are correct. Read chapter 19 before you start doing the problem.)
Calculate the expected value, standard deviation, and the coefficient of variation of KT's ROE with the sales figures for the current year.
Your sister’s company currently manufactures a line of inexpensive cell phone cases.
Calculate the base-case NPV (net present value). Find the adjusted present value (APV).
What logical arguments would you use to convince your boss to forego the project despite its high rate of return?
Evaluate the investment using four investment appraisal criteria.
A put option expires in three months and has X $40. The underlying stock is worth $42 today.- Use the binomial model to value the put option.
Global Services is considering a promotional campaign that will increase annual credit sales by $420,000. The company will require investments in accounts receivable, inventory, and plant and equipment. Accounts receivable management requires credit ..
What is the effective annual interest rate charged on such a loan, assuming loan repayment occurs over 156 months?
Your sister is considering to add one additional stock to a three stock portfolio, to form a four stock portfolio. The three stocks currently held all have b=1.0, and they are perfectly positively correlated with the market.
What are three political risk factors?
Project A has an initial cost of $80,000 and provides cash inflows of $34,000 a year for three years. Project B has an initial cost of $80,000 and produces a cash inflow of $114,000 in year three. The projects are martially exclusive. Which project(s..
Costa Company has a capacity of 40,000 units per year and is currently selling 35,000 for $400 each. Barton Company has approached Costa about buying 2,000 units for only $300 each.
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