Reference no: EM131263209
Instructions:
1. You will access the quiz during a designated open 24-hour window. The start and finish times will be electronically recorded.
2. There are 2 (TWO) questions on this quiz and 4 (FOUR) pages in total, including this cover page.
3. This is an open-book quiz. You can access any material you want to help you answer the questions.
4. Each question has multiple parts and some are more difficult than others. Attempt each of the parts to achieve full points. If you get stuck on one part, consider moving on to others to maximize your points.
5. All your work and your answers should be furnished within the quiz document. Enough space for the answer is provided.
6. Read the questions carefully.
7. Show all your calculations.
8. Write as clearly as possible so I can understand what you are doing and so I can give you as much credit as possible for the work.
Question 1 - Capital Budgeting Decisions
(a) What is the NPV decision rule in capital budgeting decisions? How is it different from the Internal Rate of Return (IRR) rule and the Payback rule? Outline some of the pitfalls in applying the IRR and Payback rules? What is the Profitability Index (PI)? What are its benefits and potential shortcomings?
b) Tableau is thinking about marketing a new financial software product. Upfront costs to develop and market the product are $3 million. The product is expected to generate profits of $1.25 million per year for 7 years. A second round of marketing costing $1 million is projected for Year 5. The company will also have to provide product support expected to cost $60,000 per year in perpetuity but only starting in Year 3. Assume all profits and expenses occur at the end of the year.
a) What is the net present value (NPV) of this investment if the cost of capital is 7%? Should the firm undertake the project? Can the IRR rule be used to evaluate this investment? Why or why not?
Question 2 - Time Value of Money
Analysts predict that earnings for Panera Bread Company (Nasdaq symbol: PNRA) will grow at 25% per year for the next four years. After that, as competition increases, earnings growth is expected to slow to 5% per year and continue at that level forever. PNRA's earnings this past year was $161.5 million. What is the present value of all future earnings if the discount rate is 11%? (Assume that all cash flows occur at the end of the year.)
Topics Covered:
Arbitrage and Financial DecisionMaking
TheTime Value of Money
Interest Rates: Nominal, Effective Quotes and AdjustmentsReadings
Valuing Bonds
The Yield Curve and Bond Arbitrage
Valuing Projects: Investment Decision Rules
Fundamentals of Capital Budgeting
Valuing Stocks using the Dividend Discount Model
Total Payout and Free Cash Flow Valuation
Determination on whether to raise prices
: If you were a store manager, would you rather raise prices on all goods and services or selected products? How do stores make the determination on whether to raise prices?
|
The deferred tax asset and deferred tax liability accounts
: XYZ is a calendar year, accrual basis C corporation headquartered in St. Paul that provides advertising services to tour and travel companies. Prepare the journal entry to record XYZ’s 2016 federal income tax expense, federal income tax payable, and ..
|
Raise prices on elastic products
: In detail, please answer: what are some of the challenges that a store is facing if they raise prices on elastic products?
|
Describe success a local sporting event had with security
: Time is a competitive advantage for an event planner. - Event planners who have a pre-event security strategy will have a good long-term plan.
|
What is the npv decision rule in capital budgeting decisions
: What is the NPV decision rule in capital budgeting decisions? How is it different from the Internal Rate of Return (IRR) rule and the Payback rule? Outline some of the pitfalls in applying the IRR and Payback rules?
|
What is relationship between gender influence and persuasion
: What is the relationship between gender, influence, and persuasion? Describe at least two explanations researchers have used to explain why gender differences have or have not been found. Explain your reasoning.
|
Find the company market cap
: BA430/BA430M Assignment - Stocks and Options. Find the company market cap then use it to find out number of common stocks in the company. How does your calculated number of common stocks compare to the number in the 10K SEC Filing
|
Prepare a contribution format income statement
: If the new plant is built, how many balls will have to be sold next year to earn the same net operating income, $126,000, as last year? (Do not round intermediate calculations.). Assume the new plant is built and that next year the company manufactur..
|