Generate its first annual cash flow

Assignment Help Financial Management
Reference no: EM13846277

You are building a pipeline which will generate its first annual cash flow of $2m exactly 5 years from today. As it ages, the volume it transports, and hence the cash flows it creates, will decline by 3% per year. Exactly 27 years from today, this pipeline will be scrapped, and the Environmental Protection Agency will require you to spend $50m then to dismantle it. The pipeline’s OCC is 9%. What’s the lowest price that you would consider selling it for?

Reference no: EM13846277

Questions Cloud

About the geometric return : Your grandfather invested $1,000 in a stock 47 years ago. Currently the value of his account is $318,000. What is his geometric return over this period? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal plac..
Enter variance as decimal and standard deviation : The rate of return on Cherry Jalopies, Inc., stock over the last five years was 23 percent, 11 percent, -5 percent, 7 percent, and 10 percent. Over the same period, the return on Straw Construction Company’s stock was 16 percent, 24 percent, -6 perce..
Established company with a traditionally based pay system : Assume you work for an old established company with a traditionally based pay system. Would you rather have a seniority-based pay system or a merit-based pay system and explain why?
Bond issued-what is the quoted annualized coupon rate : You are considering buying a bond issued by General Motors with exactly 5.5 years remaining to maturity that just paid a coupon yesterday. It rained on your paper this morning so you do not know what the coupon rate is. However you are able to see th..
Generate its first annual cash flow : You are building a pipeline which will generate its first annual cash flow of $2m exactly 5 years from today. As it ages, the volume it transports, and hence the cash flows it creates, will decline by 3% per year. Exactly 27 years from today, this pi..
Calculate financial ratios-evaluating financial statement : It is often stated that anyone with a pencil can calculate financial ratios, but it takes a brain to interpret them. What kinds of things should the analyst keep in mind when evaluating the financial statements of a given firm?
Emerge as major producer of computer software : Obsolete Computer Systems, Inc. wants to emerge as a major producer of computer software. The company has two options: Either it can purchase Upstart Software for $25m now whose products are expected to survive 5 years. As a member of Obsolete’s boar..
Purchase short-lived assets and frequently replace them : During periods of high inflation, U.S. firms have strong incentives to purchase short-lived assets and frequently replace them, rather than investing in long-lived assets. True, False, Uncertain and Explain
About the earnings per share : Assume a stock selling for $44.89 has a dividend yield of 3.1 percent and a PE ratio of 20.1. What is the earnings per share (EPS) for the company?

Reviews

Write a Review

Financial Management Questions & Answers

  Required take too much time and thus not be cost-effective

If you were the CFO of a company that had to decide on hundreds of potential projects every year, would you want to use sensitivity analysis and scenario analysis or would the amount of arithmetic required take too much time and thus not be cost-effe..

  Compute the ratio of income taxes to income earnings

Which is the largest expense for each company in the most recent year? What is its dollar amount? Is it logical that this would be the largest expense given the nature of each company's business? Explain your answer.

  Describing a firms capital structure

(Describing a firm’s capital structure) Lowe’s Companies, Inc. (LOW) and its subsidiaries operate as a home improvement retailer in the United States and Canada. As of February 1, 2008, it operated 1,534 stores in 50 states and Canada. The company’s ..

  Determine end of coming year level of accounts receivable

In the past a company's collection period has been 45 days. Using the percentage of sales method, determine the end of coming year level of accounts receivable that accompany the following sales levels if accounts receive able were a spontaneous asse..

  What effective annual rate are they paying

Binder’s Books offers customers credit terms of 4/10, net 40. If their customers don’t take the discount, what effective annual rate are they paying?

  Expected return-discrete distribution-required rate of retun

The market and Stock J have the following probability distributions:  Calculate the expected rates of return for the market and Stock J. Calculate the standard deviations for the market and Stock J. As an equity analyst you are concerned with what wi..

  Determine the investments net present value

Determine the investment's net present value, the internal rate of return, payback period and the discounted payback period and analyse the profitability of Briscoes Ltd by preparing a common-size income statement and by calculating any other ratios..

  Higher debt ratio and interest expense than firm

Firm A and Firm B have the same total assets, ROA and profit margin (greater than 0). However, Firm B has a higher debt ratio and interest expense than Firm A.

  Sports and globalization efforts of professional sports leag

Complete a thorough review on the topics of the business of sports and globalization efforts of professional sports leagues. Organize your two-to-three page paper according to appropriate APA style including a title page and reference page.

  What is the amount of the operating cash flow for a firm

What is the amount of the operating cash flow for a firm with revenues of $1,000,000; expenses of 400,000; depreciation expense of $100,000; and a 35% marginal tax rate?

  The bond equivalent yield and the effective annual return

A Treasury bill with 136 days to maturity is quoted at 96.012. What is the bank discount yield, the bond equivalent yield, and the effective annual return? (Do not round intermediate calculations. Enter your answers as a percent rounded to 3 decimal ..

  Questions regarding financial management

Explain what the information needs of various stakeholders are for their respective decision making needs.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd