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1. What is the NPV of each of the options below at a 10% discount rate?
2. What is the equivalent annual cash flow of each of the options at a 10% discount rate?
3. Which is the better option? Why?
A: Buy 10 new planes for $100 million total; only generates $1 million annually (total for all planes) in maintenance and energy costs over a 30 year period.
B: buy 10 used planes for $20 million total; annual costs are $10 million per year for 20 years
C: lease for no upfront costs; annual lease for all 10 planes is $8 million plus $4 million in annual costs over 10 years. (show work for cash flow and formulas)
Your retirement fund consists of a $7,500 investment in each of 20 different common stocks. The portfolio's beta is 2.15. Now, suppose you sell one of the stocks with a beta of 1.0 for $7,500 and use the proceeds to buy another stock whose beta is 1...
what is the IRR(%) for the following project if its initial after tax cost is 5,000,000 and its is expected to provide after-tax operating cash inflows of 1,800,000 in year 1, $1,900,000 in year 2, $1,700,000 in year 3, and 1,300,000 in year 4?
You buy a straddle, which means you purchase a put and a call with the same strike price. The put price is $1.20 and the call price is $3.50. Assume the strike price is $30. a. What are the expiration date profits to this position for stock prices of..
Consider the auction of 2-year Floating Rate Notes in July 2014. As we saw in class, the notes are priced at par and investors receive face value at maturity. Once the spread was determined at the auction, which cash flows were known with certainty t..
You deposit $1,900 at the end of each year into an account paying 10.1 percent interest. How much money will you have in the account in 24 years? How much will you have if you make deposits for 48 years?
Earth’s Best Company has sales of $200,000, Cost of Goods Sold of 100,000, a net income of $15,000, and the following balance sheet: Calculate the firm’s Quick Ratio?
The inventory order quantity that minimizes total holding and ordering costs is which of the following?
You want to invest money for 3 years in an account that pays 7 percent interest annually. How much would you need to invest today to reach a future goal of $5,000? What is the present value of $2,200, discounted at 10 percent interest per period, for..
A firm has a weighted average cost of capital of 10.295 percent and a cost of equity of 14.7 percent. The debt-equity ratio is 0.75. Tax rate is 32%. What is the firm's cost of debt? Sabrina's just paid an annual dividend of $0.88 per share. This div..
Use the IRR approach to find the maximum shutdown costs you could incur and still meet your cost of capital of 15% on this project.
Quiet Press has a 38-day accounts receivable period. The estimated quarterly sales for this year, starting with the first quarter are $1,200, $1,400, $1,900, and $1.200, respectively. How much does the firm expect to collect in the fourth quarter? As..
An analyst who looks at real estate decides to apply the capital asset pricing model to estimate the risk (beta) for real estate.
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