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Applied Nanotech is thinking about introducing a new surface cleaning machine. The marketing department has come up with the estimate that Applied Nanotech can sell 15 units per year at $300,000 net cash flow per unit for the next five years. The engineering department has come up with the estimate that developing the machine will take a $14.8 million initial investment. The finance department has estimated that a discount rate of 16 percent should be used. a. What is the base-case NPV? (A negative answer should be indicated by a minus sign. Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Base-case NPV $ b. If unsuccessful, after the first year the project can be dismantled and will have an aftertax salvage value of $10.5 million. Also, after the first year, expected cash flows will be revised up to 20 units per year or to 0 units, with equal probability. What is the revised NPV? (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Revised NPV $
A common stock is expected to generate an end-of-period dividend of $5 and an end-of-period price of $62. If this security has a beta coefficient of 1.3, the risk-free interest rate is 10%, and the expected return on the market portfolio is 19%, then..
The portfolio Alpha has an expected return of 18.50% and risk of 60%. The portfolio Gamma has an expected return of 11.75% and risk of 30%. The risk of market portfolio is 40%. Ms. Investor would like to create the portfolio Delta by utilizing the ri..
A firm recently purchased a new facility costing $962 thousand. The firm financed this purchase with an amortized loan at an interest rate of 9.7 percent APR, with monthly payments of $16.1 thousand. How long will it take to pay off this loan? (Enter..
Assume that your parents wanted to have $160,000 saved for college by your 18th birthday and they started saving on your first birthday. They saved the same amount each year on your birthday and earned 11.5% per year on their investments. How much wo..
The Colleges are facing issues of survival after the government further cut their funding. Two colleges have decided to merge to safeguard their provision and safeguard their staff jobs. Discuss the role of inter audit in the assurance process throug..
What is the present value of an investment that has three cash flows of -$3000, $4,000, and $6,000? These cash flows occur at the end of year 1, 2, and 3 respectively. Use a discount rate (required rate of return) of 13.5%.
Relevant Cash flow scenario Assume you have just graduated from college with a degree in finance and you are trying to explain to your boss the importance of identifying and using the appropriate cash flows when you make financial decisions. The comp..
Despite increasing revenues over the past three years Whole Foods Market (WFM) has experienced disappointing profits during the same interval. While WFM’s overall revenues increased by approximately 8% in 2015, Opening a series of new supermarkets is..
Weston Industries has a debt–equity ratio of 1.8. Its WACC is 8.3 percent, and its cost of debt is 6.3 percent. The corporate tax rate is 35 percent. What is Weston's cost of equity capital? What would the cost of equity be if the debt-equity ratio w..
A project is worth $15 million today without an abandonment option. Suppose the value of the project is either $20 million one year from today (if product demand is high) or $10 million (if product demand is low). It is possible to sell off the proje..
You purchased 2,000 shares of the New Fund at a price of $12 per share at the beginning of the year. You paid a front-end load of 4%. The securities in which the fund invests increase in value by 12% during the year. The fund's expense ratio is 2.2%...
A bond that pays interest annually yielded 7.50 percent last year. The inflation rate for the same period was 5.50 percent. what was the actual real rate of return on this bond for last year?
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