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What is the maximum amount the firm should pay

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Reference no: EM13281811

1) A firm has the following investment alternatives:

Cash Inflows

Year A B C

1 $500 $0 $0

2 500 400 0

3 500 800 0

4 600 900 1,900

Which investment should be considered? (for any credit, show your work). Use a 9.5% discount rate. Hint: A discount rate gives you the clue that you should perform a present value analysis on each investment.

2). An investment is expected to generate $2,000,000 each year for five years. If the firm's cost of funds is 5%, what is the maximum amount the firm should pay for the investment? (for any credit, show your work)


3)21. A firm has 40,000,000 in revenues, 12,500,000 in fixed costs, 10,250,000 in variable costs, and interest of 2,000,000. Compute (for any credit, show your work):

a) DOL

b) DFL

c) DCL

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This paper is all about Finacial management. This paper helps to take decisions regarding the investments on the basis of future cash inflows. In this paper present value approach has been used to take decisions regarding investments. Leverage is calculated to determine the ability of the firm in employing long term funds associated with fixed cost to increase the returns of the owners.This paper has been prepared in Microsoft Excel.

Reference no: EM13281811

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