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Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 –$417,000 –$36,000 1 48,000 19,600 2 58,000 14,100 3 75,000 14,600 4 532,000 11,400 The required return on these investments is 13 percent. Required: (a) What is the payback period for each project? (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).) Payback period Project A 3.44 years Project B 2.15 years (b) What is the NPV for each project? (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).) Net present value Project A $ Project B $ (c) What is the IRR for each project? (Do not round intermediate calculations. Enter your answers as a percentage rounded to 2 decimal places (e.g., 32.16).) Internal rate of return Project A 16.76 % Project B 26.45 % (d) What is the profitability index for each project? (Do not round intermediate calculations. Round your answers to 3 decimal places (e.g., 32.161).) Profitability index Project A Project B (e) Based on your answers in (a) through (d), which project will you finally choose?
Brenda Callaway wants to borrow money to purchase some new appliances. The bank offered her a $1000 loan at 8 percent simple interest and an upfront service charge of $45. If she is required to pay the entire loan back at the end of one year, what is..
Analysts predict that a company's earning will grow at 30% per year for the next five years. After, earnings growth is expected to slow down to 6% a year and continue at that rate forever. The company's earnings are $2 million. What is the present va..
What is the expected dollar cost of the money market hedge? What is the expected dollar cost of remaining unhedged? What is the expected dollar cost of the forward hedge?
A $20,000 4% loan is to be repaid in n level annual instalments, commencing one year after the date of the loan. The amount of principal included in the 4th instalment is $450. In which of the following rangers is the amount of the instalment?
The company you work for will deposit $600 at the end of each month into your retirement fund. Interest is compounded monthly. You plan to retire 30 years from now and estimate that you will need $5,000 per month out of the account for 25 years.
PV of multiple cash flows: Ferris, Inc., has borrowed from their bank at a rate of 8 percent and will repay the loan with interest over the next five years. Their scheduled payments, starting at the end of the year are as follows—$450,000, $560,000, ..
Assume that $1000.00 par value, semiannual coupon U.S. Treasury note with two years to maturity (YTM) has a coupon rate of 5%. The yield to maturity of the bond is 8.80%. Using this information and ignoring the other costs involved, calculate the val..
You wish to buy a $14,000 dining room set. The furniture store offers you a five-year loan with a 11 percent APR. What are the monthly payments? What are the monthly payments if you only paid interest over the length of the loan and your principal ba..
What is g if you have the following information: Revenues= 100000, expenses=80000, Shares= 100000 equity= 100000 discount rate= 10% dividends= $.07 per share, Depreciation= $15000 Taxes= 30%
You have just borrowed $235,000 using a 1/1 ARM where payments for the first year are interest-only and the balance of the loan is fully amortized over the remaining 29 years. If you expect the yield on the 1-year LIBOR to be 4% one year from now, wh..
A firm is considering whether to issue the following securities: Fees reduce the proceeds to the issuer on the issuance date. Which financing alternative is best? Calculate borrowing costs and discuss other factors that might influence your decision
Travels Sailing, Inc. sells sailing trips at the seashore. Travels has asked for help in calculating its earnings available to common stockholders. The firm generated revenues of $35,000 from its products. The operating costs to produce the products ..
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