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a) Use excel of a financial calculator to estimate the IRR of the following business opportunity: Initial cost of $100,000, expected pre-tax annual cash flows of $54,000 for the next 7 years, and a 20% small business tax rate. There are no assets to depreciate but there is a yearly $25,000 pre-tax opportunity cost which recognizes the time you spend operating the business.
b) For this type of risky investment, you would normally require at least a 16% rate of return to compensate for the business risk alone. Assuming however that you can access a line of credit with a fixed rate of 6%, what is the minimum amount of debt capital ($$) that you would have borrow before the project becomes profitable to finance?
c) What is the most important difference between the NPV and IRR methodologies? Discuss briefly whether or not you feel that distinction would be important to this particular case.
Lott Corporation showed the following balances in its inventory accounts as of January 1: Raw materials inventory $28,800 Work-in-process inventory 36,000 Finished goods i
Suppose you take out a loan of $10,000, repayable by five equal annual instalments. The interest rate is 10% per year. (a) How much do you need to repay per year to the nearest ce
just to be absolutely clear, is this the cash revues less the cost of the project less the initial outlay. Could you provide me with the makeup?.
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An original United States silver dollar from the late 1800s consists of about 24 grains of silver. Suppose that at current prices, the silver content of this coin is worth $2.25.
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