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An American firm is evaluating an investment in Mexico. The project will require purchasing equipment from a variety of sources and shipping it to Mexico. The projected cost of buying the equipment and shipping it is $4.2 million. Once the project begins operations, it is expected to last for 5 years (assume straight line depreciation). Expected sales are $2,900,000 each year in the U.S. and the costs of the project are projected to be 7 million pesos each year for the 5 years. If taxes are 35%, the appropriate discount rate is 10% and you use the current exchange rate for pesos:
(a) Calculate the NPV in U.S. dollars. (Show all calculations and ignore working capital)
(b) Calculate the NPV in Mexican pesos. (Show all calculations and ignore working capital)
Suppose you deposit $1000 in one year, $2000 in two years, and $4000 in three years. Assume a 4 percent interest throughout. How much will you have in 5 years?
Consider the following information: Rate of Return If State Occurs State of Probability of Economy State of Economy Stock A Stock B Stock C Boom .15 .39 .49 .29 Good .55 .15 .20 .08 Poor .25 −.01 −.09 −.07 Bust .05 −.20 −.24 −.10 a. Your portfolio is..
What interest rate would make it worthwhile to incur a compensating balance of $9,000 in order to get a 0.65 percent lower interest rate on a 2 year, pure discount loan of $165,000?
In preparation for the meeting you intend to make notes of the points you will raise with the directors. You are aware that the directors are people who have skills in horticulture and retailing, but not in more general business issues, particula..
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The balance of the Retained Earnings at the beginning of the year was $950,000 and there were no dividends in arrears. Net income for 2015 was $980,000. What was the amount of dividend declared on each share of common stock during 2015?
Annual Maintenance Cost starts in year 3 and increases $100 per year Annual Income starts in the year noted and increases at the rate G1 for 5 years, then becomes stable for 3 years and then declines at the rate G2 for 4 years. Compute the present wo..
A stock currently costs $ 85 and pays a $ 3.50 dividend. If you expect to sell the stock after 10 years for $ 125 what is your anticipated return on the investment.
Which one of the following would tend to create an unexpected increase in a firm's accounts receivable period?
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Renfro Rentals has issued bonds that have a 10% coupon rate, payable semi annually. The bonds mature in 15 years, have a face value of $1,000, and a yield to maturity of 7%. What is the price of the bonds?
What is the yield to maturity (YTM) of a zero coupon bond with a face value of $1,000, current price of $730 and maturity of 7 years? Recall that the compounding interval is 6 months and the YTM, like all interest rates, is reported on an annualized ..
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