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Innovation Company is thinking about marketing a new software product. Upfront costs to market and develop the product are $ 4.93 million. The product is expected to generate profits of $ 1.01 million per year for ten years. The company will have to provide product support expected to cost $92,000 per year in perpetuity. Assume all profits and expenses occur at the end of the year.
a. What is the NPV of this investment if the cost of capital is 5.7 % Should the firm undertake the project? Repeat the analysis for discount rates of 1.8 % and 12.6 % respectively.
b. What is the IRR of this investment opportunity?
c. What does the IRR rule indicate about this investment?
Assume that a product sells for $100 per ton and that Pittsburg is the basing-point city for calculating transporation charges. Shipping from Pittsburg to a potential customer in Cincinati cost $10 per ton. What delivered price would a salespersn for..
prepare a three page paper that responds to the coca-cola research case questions using the web access the coca-cola
We are given the information that Microthin’s stock price was $21 in December 2012, $29 in December 2013, $27 in December 2014, $20 in December 2015, and $26 in December 2016. It also pays annual dividends varying from 2012 through 2016. Is your Micr..
As cash manager for an oil company, you are responsible for the firm’s cash management activities. One of these activities is the management of the firm’s retail cash collection system. Your firm receives an average of 130,000 remittances per month w..
The Woods Co. and the mickelson Co. have both announced IPOs at $53 per share. What profit do you actually expect?
ABC, Inc. has a D/E ratio of 1.2. The firm has a cost of equity of 12% and a cost of debt of 8%. What will the cost of equity be if the target capital structure becomes 67% debt and 33% equity? The cost of debt does not change.
A pure discount (or zero-coupon) government bond is issued today that promises to pay $10,000 in 5 years. If the current interest rate on similar bonds is 6%, what is the price of the bond? Recall that the compounding interval for bonds is 6 months.
Except for Treasury bills, money market securities are not free of default risk. Standard & Poor’s 500 is a broadly based index of 500 firms and it is a price-weighted index.
Compute the Percentage of earnings retained, Price/earnings ratio, Dividend payout, Dividend yield and Book value per share for 2011, 2010, and 2009:
You want to create a portfolio equally as risky as the market, and you have $900,000 to invest. Given this information, fill in the rest of the following table: Asset Investment Beta Stock A $ 180,000 .80 Stock B $ 270,000 1.20 Stock C ? 1.50 Risk-fr..
You have ?$57,000. You put 20?% of your money in a stock with an expected return of 14%, ?$40,000 in a stock with an expected return of 18?%, and the rest in a stock with an expected return of 21?%. What is the expected return of your? portfolio? The..
DiCapri Company is considering a new project whose data are shown below. The equipment that would be used has a 3-year tax life, would be depreciated straight-line method over its 3-year life, and would have a zero salvage value. No new working capit..
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