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Mr. Landis, President of Assault Weapons, inc. was pleased to hear that he had three offers from major defense companies for his latest missile firing automatic ejector. He will use a discount rate of 12% to evaluate each offer. Offer I - $500,000 now plus $120,000 from the end of year 6 through 15. Also, if the product goes over $50 million in cumulative sales by the end of year 15, he will receive an additional $1,500,000. Mr. Landis thought there was a 75% probability this would happen. Offer II - 25% of the buyer's gross margin for the next 4 years. The buyer on this case is Air Defense, Inc. (ADI). Its gross margin is 65 percent. Sales for year 1 are projected to be $1 million and then grow by 40% per year. This amount is paid today and is not discounted. Offer III - A trust fund would be set up for the next nine years. At the end if that period, Mr. Landis would receive the proceeds (and discount them back to the present at 12%). The trust funds called for semiannual payments for the next 9 years of $80,000 (a total of $160,000 per year). The payments would start immediately. Since the payments are coming at the beginning of each period instead of the end, this is an annuity due. Assume the annual interest rate on this annuity is 12% annually (6% semiannually). How would I find the present value of the trust fund's final value, the present value of each of the three offers, and then which offer would be the best? Please explain how each answer is acheived.
Jo's Coffee corporation have two stores in Arizona. Their corporate office is planning eliminating the one of their stores due to declining sales.
Explain Evaluation of bond receipts at various interest rates and What is the effective interest rate
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Which of the following is an advantage of floating rate bonds to investors?
If the expected T-bill rate is 1.5 percent, what is the expected risk premium on the portfolio?
A newly issued corporate bond has twenty years to maturity. The bond has a coupon rate of 8 percent and pays interest semiannually. Also the bond is callable in six years at a call price equal to 115% of par value.
Find the financial statements for a publicly traded company, and calculate the company's z-score. Identify (approximately 100 words) whether you think the company is at risk for financial failure, based upon its z-score and other factors that you ..
Chad is saving for retirement. Expects to spend $43,500 per year for 15 years. Earns 6% per year with semi-annual compounding on his invested funds. Will draw down on his retirement foun at the beginning of retirement.
If a corporation wants to allocate Head Quarters administrative expenses to its consulting offices and discuss the pros and cons for each of the following in terms of incentives,
Johnson & Johnson and Procter & Gamble these two companies are to that trade the similiar products and are in the same industry.
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