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Big steve's makers of swizzle tickets is considering the purchase of a new plastic stamping machine. This investment requires an initial outlay of $110,000 nd will generate net cash inflows of $16,000 per year for 8 years.
a) What is the projected NPV using a discount rate of 9%? Should their project be accepted? Why or why not?
b) What is the projected NPV using a discount rate of 14%? Should their project be accepted? Why or why not?
c) What is the projects internal rate of return? Should their project be accepted? Why or why not?
You are considering two loans. The terms of the two loans are equivalent with the exception of the interest rates. Loan A offers a rate of 7.75 percent, compounded daily. Loan B offers a rate of 8 percent, compounded semi-annually. Which loan should ..
Suppose that the parents of a young child decide to make annual deposits into a savings account with the first deposit on the 5th birthday and the last on the 15th birthday.
A firm has sales of $173,000, total assets of 160,000, net income of $15,000, and dividends paid of $3,000. What is the internal growth rate?
Two years ago Abilia purchased a $13,000 car; she paid $2,500 down and borrowed the rest. She took a fixed rate 60-month instalment loan at a stated rate of 7.0% per year. Interest rates have fallen during the last two years and she can refinance her..
Explain how using a risk-adjusted discount rate improves capital budgeting decision making compared to using a single discount rate for all projects?
Within a given distribution channel, the following information is available concerning trade margins and costs. A wholesaler has a unit selling price of $250 and a unit cost of $140. The retailer requires a 33% mark up on selling price. The manufactu..
Shi Importers' balance sheet shows $300 million in debt, $50 million in preferred stock, and $250 million in total common equity. Shi's tax rate is 30%, rd = 6%, rps = 8.7%, and rs = 13%. If Shi has a target capital structure of 30% debt, 5% preferre..
Which of the following is a true regarding the appropriate tax rate to be used in the WACC?
If Consolidated Power is priced at $50 with dividend, and its price falls to $46.50 when a dividend of $5 is paid, what is the implied marginal rate of personal taxes for its stockholders? Assume that the tax on capital gains for the marginal investo..
According to the NPV, which franchise or franchises would be accepted if they are independent? Which could be accepted if they are mutually exclusive? Evaluate each franchise's NPV? Be sure to show your calculations.
Your research has determined the following: Company (Co.) A current dvd is 1.36, Beta = 1.7 and P/E is 23. Cash flow to equity per share is 4.72. Current risk free rate is 2.5% and the expected market return is 10%. Co. A ROE is 16% and has an EPS of..
The Global Growth Fund is a load fund with a 6 percent front load fee. It started the year with a Net Asset Value (NAV) of $16.50. During the year the fund distributed $1.05, and at the end of the year its NAV was $17.95. What was the fund's return, ..
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