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XYZ, Inc. is considering a 5 year, 12% WACC capital budgeting project under three scenarios. If conditions are excellent, the cash flows from this project are expected to be $4,000 per year; under fair conditions, cash flows are projected at $2,500 per year; and under unfavorable conditions, cash flows are projected at ($600) per year. The initial investment outlay is $3,000 and the probabilities of these three conditions are 30%, 50% and 20%, respectively. Assume that XYZ has the option to abandon this project in the second year if conditions are unfavorable. It could do so by selling this project to another company at a price of $1,500 in year 2 and consequently cash flows would be 0 in years 3 and beyond. Calculate the expected NPV of this project given the abandonment option.
a.what is a ventures present value? does the past matter? what is meant by the statement if you are not using
A bond that pays interest annually yields a rate of return of 7.00 percent. The inflation rate for the same period is 4 percent. What is the real rate of return on this bond?
Compact fluorescent lamps (CFLs) have become required in recent years, but do they make financial sense? Suppose a typical 60-watt incandescent light bulb costs $.41 and lasts for 1,000 hours. You require a return of 9 percent and use a light fixture..
You are serving on a jury. A plaintiff is suing the city for injuries sustained after a freak street sweeper accident. In the trial, doctors testified that it will be five years before the plaintiff is able to return to work. If the interest rate yo..
Most of the examples in the text are medium or large companies. Think about the concepts of risk which are part of this section of the course in the context of the size of a firm. Would these change if the firm were large? Small ? Medium-sized? Any ..
You are evaluating two different silicon wafer milling machines. The Techron I costs $225,000, has a three-year life, and has pretax operating costs of $58,000 per year. The Techron II costs $395,000, has a five-year life, and has pretax operating co..
Bob makes his first $400 deposit into an IRA earning 8.1% compounded annually on his 24th birthday and his last $400 deposit on his 43rd birthday (20 equal deposits in all). With no additional deposits, the money in the IRA continues to earn 8.1% int..
Assume that a share of stock will pay dividends of $2 in one year, $3 in two years, and $3.50 in three years. For all years after year 3, dividends will grow at a rate of 5%. If shareholders’ required rate of return is 15%, what will be the suggested..
it is analysed projected financial data and assessed its value to making a physical expansion decision. as you have
Stock J has a beta of 1.20 and an expected return of 13.16 percent, while Stock K has a beta of .75 and an expected return of 10.10 percent. You want a portfolio with the same risk as the market. What is the expected return of your portfolio?
Whats the monthly payment and how much is the borrowers income tax write off in the first year?
The Owner of a small business borrowed $70,000 with an agreement to repay the loan with quarterly payment over a five year time period. If the interest rate is %12 per year compounded quarterly, his loan payment each quarter is nearest to:
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