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Pierre Bouvier is evaluating four projects. The cash flows for the four projects are given here.
TIME 0 1 2 3 4PROJECT K -100 40 40 40 40PROJECT L -100 40 80 0 40PROJECT M -90 40 80 0 30PROJECT N -90 40 80 0 40
a. Pierre thinks you can rank these projects from best to worst by simply inspecting the cash flows (and not calculating anything). Try to do so.
b. Pierre next found the NPV of each project, discounting future cash flows at 10%. What is the NPV for each project?
c. Do your rankings in parts a and b agree?
Discuss the use of each major financial statement in financial management. Explain the use of pro forma financial statements in financial planning and forecasting.
Anton's Coffee Shop has a return on assets of 12%. Anton's assets = $100 while Anton's owner's equity = $40 and its debt equals $60. What is Anton's return on equity?
A stock sells for $40. The next dividend will be $4 per share. If the rate of return earned on reinvested funds is 15% and the company reinvests 40% of earnings in the company.
Suppose you have worked out a line of credit arrangement that allows you to borrow up to $50 million at any time. The interest rate is .425% each month.
Harris intends to maintain its 55% debt and 45% common equity capital structure, and its net income is expected to be $9,687,000. If Harris maintains its residual dividend policy (with all distributions in the form of dividends).
Some people take a position that the Return on Investment (RoI) is the appropriate measure or decision rule to use. Do you agree? Why or why not? How would the project's RoI be calculated?
A stock has a beta of 1.08 and a standard deviation of 9.6%. The risk-free rate is 4.2% and the market risk premium is 7.8%.
Bill Smith is borrowing $15,000 at 10% interest for 3 years. Payments are monthly and are calculated by using the add-on method. What are the monthly payments?
Suppose prices increase at the inflation rate, but costs increase at half the inflation rate. What is the value of the apple groves?
Define Comparison of borrowing costs based on annual percentage yield and the bond has a 20-year life
Apex, Inc is a biotechnology company that is about to announce the results of its clinical trials of a potential new cancer drug, If the trials successful, Apex stock will be worth $70 each share.
A equipment operator stamps labels on sheets of metal that are later made into cans. Each sheet can make 118 cans. Cost per sheet of metal is $10.60.
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