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Louie's Leisure Products must choose between buying two machines with different lives. Machines A and B are designed differently, but have identical capacity and do the same job. Machine A costs $1000,000 and lasts 5 years. It costs 500,000 in the first year and $400,000 per year to operate in year 2-5. Machine B costs $400,000 and lasts 2 years. It costs $300,000 per year to operate.
a. Which machine should the company acquire? The opportunity cost of capital is 6%.
b. If the revenues were given, could you choose one of the machines by comparing the Internal Rate of Returns (IRR) of the two alternatives? Why?
The current price for IBM is $170 and AAPL is $125. What would you recommend concerning these two stocks?
Suppose the yield on short-term government securities (perceived to be risk-free is about 4%. Suppose also that the expected return required by the market for a portfolio with a beta of 1 is 11.0%. According to the capital asset pricing model.
a. Compute the NPV b. Compute the IRR c. Compute the modified IRR using a 12 percent discount rate
Design an individual pay or group pay plan for your employer. This plan support the retention of talent needed for company's long term strategic initiatives.
A firm has $400,000 in credit sales and $100,000 in accounts receivable. Compute accounts receivable turnover and average number of collection days.
What is the break-even level of earnings before interest and taxes between these two options? Ignore taxes.
From a management perspective, what do you see as the pros and cons of launching Lightening Bolt?
Perpetuities A prestigious investment bank designed a new security that pays a quarterly dividend of $3 in perpetuity. The first dividend occurs one quarter from today. What is the price of the security if the stated annual interest rate is 9 perc..
What are the various methods for evaluating possible capital projects, in terms of their possible benefits to the firm? Describe the benefits and/or shortcomings of each. What is the NPV profile and what are its uses?
Explain in detail why the CAPM of Anthem and United Health Care differ from each other. As a Stock Analyst, provide a recommendation.
An abrupt house price crash sends shockwaves throughout the economy.
The current price of a stick is $20 and last year's price was $18.87. The last dividendis $2. Assume a constant growth rate in dividends and stock price. What is the stock's return for the coming year?
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