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Johnny's Lunches is considering purchasing a new, energy-efficient grill. The grill will cost $42,000 and will be depreciated straight-line over 3 years. It will be sold for scrap metal after 5 years for $10,500. The grill will have no effect on revenues but will save Johnny's $21,000 in energy expenses. The tax rate is 30%.
Required:
a. What are the operating cash flows in each year?
b. What are the total cash flows in each year?
c. Assuming the discount rate is 10%, calculate the net present value (NPV) of the cash flow stream. Should the grill be purchased?
Develop the profit-and-lost statement if net sales were $20 million last year.
A put option on a stock with a current price of $45 has an exercise price of $47. The price of the corresponding call option is $4.05.
Consider the following exotic option whose payoff at expiration is given by the stock price squared less a strike price if it has a positive value.
Calculate the number of equal annual payments of £6000 that are required to supply a future value of £306528.05 immediately after the last payment is made.
Bob invested $2,000 in an investment fund on his 21st birthday. The fund pays 7% interest compounded semiannually. Bob is celebrating his 50th birthday today.
Describe in words how a business could hedge against interest rates becoming very volatile.
Company B has the same sales, assets, and net income, but its ROE is 30 percent. What is B's debt ratio? (Hint: Begin by looking at the Du Pont equation.)
Assuming no commissions, no sales charges, and no state income stock tax and a 25 percent-federal marginal tax bracket, which investment will provide
What is the total post-IPO value of equity? What percentage of this equity will the new investors require? What is the estimated offer price per share?
What annual rate of return is earned on a $4,000 investment made in year 5 when it grows to $9,000 by the end of year 9?
1if you invest 1000 in year 1 and leave it alone for 50 years and earn 15 per year thena. how much money will you have
Prudence buys a bond in EUR when it issued by the French government and inflation linked. It offers a 2% yearly coupon. She holds it for five years.
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