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Cooper Commons is considering purchasing new, technologically advanced solar panels. The equipment will cost $625,000 with a salvage value of $50,000 at the end of its useful life of 10 years. The excess electricity from the panels will be sold back to the current electric utility. Because the amount of electricity generated from solar panels varies with the cloud cover, the equipment is expected to generate annual cash flows with the following probabilities for the next ten years:
Probability Annual Cash Flow
.15 $60,000
.25 $85,000
.45 $110,000
.15 $130,000
a) What is the expected annual cash flow? Show the calculation
(b) Cooper's cost of capital is 10%. What is the expected net present value of purchasing the solar panels? Show the calculation (PVIFA @ 10%, N=10; 6.1146) and Salvage (PVIFA @10%, N=10; 0.3855)
c) Should Cooper buy the solar panels? Why?
The following are two popular approaches used by automobile dealers: (a) Cash Rebate Versus Low Rate Dealer Financing You are given two mutually exclusive options from the dealer on a $20,000 car: (i) $1,500 cash rebate or (ii) 36-month low rate loan..
considering that the following factors of inflation the economy the budget deficit and the monetary policy of the fed
You invest $3,000 annually in a mutual fund that earns 10% annually, and you reinvest all the distributions. How much will you have in the account at the end of 20 years?
Suppose that a firm’s recent earnings per share and dividend per share are $2.70 and $1.70, respectively. Both are expected to grow at 7 percent. However, the firm’s current P/E ratio of 26 seems high for this growth rate. The P/E ratio is expected t..
you are given the following data for options on a common stocks 102nbsp x 75nbspnbsp r 2.5 t 3 months sigma .2a.
What are Diva's projected profits for the fiscal year ending September 1995 and what factors affect a firm's exposure to exchange-rate risk? How much exposure to exchange rate risk does Diva Shoes have in April 1995?
Provide recommendations for future business activity based upon your assessment. Cite references from your library research to support your conclusions of the company's performance based upon your analysis and financial ratio evaluations
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Seether Co. wants to issue new 11-year bonds for some much-needed expansion projects. The company currently has 8.7 percent coupon bonds on the market that sell for $959.22, make semi-annual payments, and mature in 11 years. The company should set a ..
You calculate an average return of 10% and a standard deviation of 5%. Assuming the returns are normally distributed, what is the probability that the investment will yield a return of less than 5%?
What general problems must be addressed in doing ratio analysis for government financial condition analysis? Do traditional solvency ratios adequately address financial condition analysis concerns? Provide your responses supported by text and other r..
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