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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.
A leveraged recap, in which Midco would issue debt and use the proceeds to repurchase shares. A Midco industry has 20 million shares outstanding with market price of $15 per share
You are planning to open a homeless shelter called Helping Hands Mission Inc. in fiscal year (FY) 2011. You expect to have 60 beds and to operate at full capacity throughout the ye
ABAN LOYD CHILES OFFSHORE LTD. Normal 0 false false false EN-US X-NONE X-NONE MicrosoftInternetExplorer4
Consider the subsequent information about four different projects. Each requires an initial outlay of Rs2,000,000 but the firm only has funds to undertake one project. The firm ha
Baobab rolling mills owns a lathe machine which was purchased 10years ago at sh. 75 million. The machine had an expected life of 15 yrs at the time it was purchased, and management
Question: a) Write down and describe the Black-Scholes option pricing formula with respect to the various determinants of option prices. b) Determine the price of a European
Question : (a) Describe how cash flows are exchanged in an "interest rate swap". (b) A government issues a 90-day Treasury Bill at a simple rate of discount of 5% per annu
The Chocolate ice cream company and the vanilla ice cream company have agreed to merge and form Fudge Swirl Consolidated.Both companies are exactly alike that are located in differ
This method simply calculates the average of a number of expert estimates. Let E denote the number of experts, and mn,e denote the forecast of expert e, e =1, ... ,E, for SKU n 2N.
CivilENG, LTD has a target capital structure of 35% debt and the remainder common equity. CivilENG’s cost of debt on the first $3 million borrowed is 7.5%, but that cost of debt in
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