What is the net present value of this investment

Assignment Help Financial Management
Reference no: EM13976203

You are making a $35,000 investment and feel that a 10.6 percent rate of return is reasonable given the nature of the risks involved. You feel you will receive at least $8,000 in the first year, $27,000 in the second year, $32,000 in the third year, and potentially could see a cash outflow of $32,000 in the fourth year. What is the net present value of this investment given your expectations?

Reference no: EM13976203

Questions Cloud

Cash break-even analysis : Air Purifier Inc. computes its break-even point strictly on the basis of cash expenditures related to fixed costs. Its total fixed costs are $2,450,000, but 15 percent of this value is represented by depreciation. Its contribution margin (price minus..
Break-even analysis : The Hartnett Corporation manufactures baseball bats with Pudge Rodriguez’s autograph stamped on them. Each bat sells for $35 and has a variable cost of $22. There are $97,500 in fixed costs involved in the production process. Compute the break-even p..
Execute locational arbitrage : Assume the bid rate of the Singapore dollar (SGD) is $0.3300, while the ask rate is $0.3350 at Bank A. Assume the bid rate for the SGD at Bank B is 0.3200, while the ask rate $0.3250. Given this information, what would be your gain if you use $1,000,..
Internal rate of return discounts all negative cash flows : The discounting approach to the modified internal rate of return discounts all negative cash flows back to the present and combine them with the initial cost. You are using a net present value profile to compare projects A and B, which are mutually e..
What is the net present value of this investment : You are making a $35,000 investment and feel that a 10.6 percent rate of return is reasonable given the nature of the risks involved. You feel you will receive at least $8,000 in the first year, $27,000 in the second year, $32,000 in the third year, ..
Calculate the cost of capital : A project which has an operational phase of 5 years and requires an initial investment of 100K $ and generate cash flow of 50K $ every year of the operational phase. Calculate the cost of capital.
Regarding the clientele effect of dividend policy : Which of the following statements regarding the “clientele effect” of dividend policy is INCORRECT?
What would the contractual discount and payment be : Jane Davis went to the hospital for a total hip implant. Her insurance has a contract with the hospital to pay them on a Per Diem basis. The per diem rate is $1,500 per day. If Jane stayed in the hospital 5 days, what would the payment be and what wo..
The expected return for common stockholders : In general, if the proper amount of debt is used, such financial leverage will ______ the expected return for common stockholders (e.g., Expected ROE) and, at the same time, ______ the risk for them (e.g., standard deviation of ROE, CV of ROE).

Reviews

Write a Review

Financial Management Questions & Answers

  Firm pays out its excess cash as a cash dividend

A firm has a market value equal to its book value. Currently, the firm has excess cash of $7,700 and other assets of $27,300. Equity is worth $35,000. The firm has 700 shares of stock outstanding and net income of $3,500. What will the stock price pe..

  Management will invest cash flows

Trigen Corp. management will invest cash flows of $1,340,423, $787,958, $958,711, $818,400, $1,239,644, and $1,617,848 in research and development over the next six years. If the appropriate interest rate is 7.15 percent, what is the future value of ..

  Twin oaks health center has a bond issue outstanding with a

twin oaks health center has a bond issue outstanding with a coupon rate of 7 percent and four years remaining until

  Compute the cost of internally generated equity

Given the following, compute the cost of internally generated equity (retained earnings) using the DCF approach: The par value of the firms outstanding 20 year 8% annual coupon debt is 1,000 and the debt currently has a market value of 800.

  What is before-tax cost of capital for this debt financing

Black Hill Inc. sells $100 million worth of 21-year to maturity 8.91% annual coupon bonds. The net proceeds (proceeds after flotation costs) are $988 for each $1,000 bond. What is the before-tax cost of capital for this debt financing?

  Portfolio of stocks worth-what position should company take

It is July 16. A company has a portfolio of stocks worth $100 million. The beta of the portfolio is 1.2. The company would like to use the CME December futures contract on the S&P 500 to change the beta of the portfolio to 0.5 during the period July ..

  Cumulative preferred stock issue outstanding

National Health Corporation (NHC) has a cumulative preferred stock issue outstanding, which has a stated annual dividend of $8 per share. The company has been losing money and has not paid preferred dividends for the last five years.  If NHC earns $1..

  Calculate the future value in five years

Assume you received $8,000 today. Calculate the future value in five years of the $8,000 if your investments pay a. 6 percent compounded annually b. 8 percent compounded annually c. 10 percent compounded annually d. 10 percent compounded semi annuall..

  Explain a reasonable strategy for bond investors

Suppose interest rates have been at historically high levels the past two years and you therefore expect they will soon go down. A reasonable strategy for bond investors during this time period would be to

  Draft an income statement and statement of cash flows

On January 3, 2013 Mandy MacMahaninvested $500,000 to open her first restaurant Alabama Barbecued Chicken in her hometown in Alabama.  Her town is known to be a trucker stop and a tourist destination as it has several antique and preserved landmarks ..

  Roles of homemade leverage

Define and discuss MM Proposition I with its implications, and the roles of homemade leverage and the Law of One Price in the development of the proposition.

  Interest rates are still very low

We are now in 2015 and interest rates are still very low. There are plenty of analysts and industry professionals who argue this has not been the correct approach. Obviously, the Fed has disagreed. Do you agree or disagree with the Fed that keeping r..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd