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These are the forecasts of revenues over the lifetime of a project. Assume all cash flows occur at the end of the year. Yearly expenses from year 1 to year 3: $30 Million Yearly revenues from year 1 to year 3: $0 Yearly expenses from year 4 to year 10: $55 Million Yearly expected revenues from year 4 to year 10: $105 Million The discount rate for the firm is 8.1% for all cash flows (net cash flows from projects, recovered NWC, salvage, etc.). In the first part of this question, you are asked to only calculate the present value of the discounted costs and revenues. What is this value? Part 2 is an annuity of $50 Million a year for 7 years, the first cash flow which will occur at the end of the 4th year, and the last one which will occur at the end of the 10th year. Now position yourself at the end of year 3. You should be able to use the annuity formula for the 7 cash flows which will occur from the end of year 4 to the end of year 10. However, you will have the value at the end of year 3 by using the annuity formula. You will have to use discounting again to find the present value, that is today. Once you have calculated the above, answer would be Part 1- Part 2= Discounted Net Cash Flows from year 4 to year 10- discounted costs from year 1 to year 3.
A 10-year, 12% semi annual coupon bond with a par value of $1,000 may be called in 4 years at a call price of $1,060. The bond sells for $1,100. Because of a recession, the inflation rate expected for the coming year is only 3%. However, the inflatio..
Suppose you have $1,500 and plan to purchase a 5-year certificate of deposit (CD) that pays 3.5% interest, compounded annually. How much will you have when the CD matures?
Macintosh computers can purchase a piece of equipment that is suspected to yield an 11% return in 10 be financed at 6% with debt. Later in the year the Company said no to the opportunity to purchase a newer machines that would yield a 9% return or co..
Stock A's beta is 1.4 and Stock B's beta is 1.5. If we assume that the Capital Asset Pricing Model holds:
You work for a nuclear research laboratory that is contemplating leasing a diagnostic scanner (leasing is a very common practice with expensive, high-tech equipment). The scanner costs $6,300,000, and it would be depreciated straight-line to zero ove..
1. nbspaccording to our readings managing change is definitely a proactive behavior that most managers and experts
What are the short run equilibrium effects of expansionary monetary policy in the DD-AA model? Make sure to analyze both temporary and permanent changes in monetary policy. What is the difference between these two scenarios with respect to equilibriu..
You purchased an immediate annuity which pays you $3,000 each year from next year for 15 years. Assuming interest rate is 5%, how much is the equivalent present value of these payments? At the same 4% annual interest rate, the future value of $1,000 ..
Sally and Ed each own property with a fair market value less than the amount of the outstanding mortgage on the property and also less than the original cost basis. They each were able to convince the mortgage holder to reduce the principal amount on..
You have $7,863 you want to invest for the next 34 years. You are offered an investment plan that will pay you 11.8 percent per year for the next 9 years and 19.2 percent per year for the remaining years. How much will you have at the end of the 34 y..
Your job pays you only once a year for all the work you did over the previous 12 months. Today, December 31, you just received your salary of $52,000 and you plan to spend all of it. However, you want to start saving for retirement beginning next yea..
The employs credit union at State University is planning the allocation of funds for the coming year. The credit union makes four types of loans to its members. In addition, the credit union inverts in risk-free securities to stabilize income. Rish-f..
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