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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 14 units per year at $306,000 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 $15.1 million initial investment. The finance department has estimated that a discount rate of 13 percent should be used.
If unsuccessful, after the first year the project can be dismantled and will have an aftertax salvage value of $11.1 million. Also, after the first year, expected cash flows will be revised up to 19 units per year or to 0 units, with equal probability. What is the NPV?
A. $1,224,733.98
B. $1,128,732.85
C. $1,396,723.89
D. $1,254,679.77
KL Airlines paid an annual dividend of $1.42 a share last month. The company is planning on paying $1.50, $1.75, and $1.80 a share over the next 3 years, respectively. After that, the dividend will be constant at $2 per share per year. What is the ma..
A firm is considering issuing bonds to raise capital for a project. The leaders at the firm are trying to figure out how much the markets will buy their bonds for (market value). They have the following information: Draw the Cash flow diagram. What i..
A stock with an above-average standard deviation must also have an above-average beta. A two-stock portfolio will always have a lower standard deviation than a one-stock portfolio. A two-stock portfolio will always have a lower beta than a one-stock ..
Last year Malko Enterprises issued 6-year bonds at par with annual coupon rate of 7.5%, payable semi-annually. These bonds currently sell for $1,050. Which of the following statements is incorrect?
The concept of reversion and remainder is not there in most countries. By having such a system, the property value goes up. Why does the value goes up?
Skipped preferred dividends become a liability of the company. Preferred stock cannot be converted into common stock. Preferred stock usually has a stated or par value but unlike bonds, this par value is not repaid at maturity because preferred stock..
Briefly describe the major third-party payers who provide revenue to healthcare providers. Also describe provider incentives and risks under each of the following reimbursement methods:
On December 20, 1994 the Nippon Telegraph & Telephone Corporation (NTT) issued ¥1 billion of 10-year debentures due December 20, 2004. The debentures carried a 4 3/4% coupon. What was the yield to maturity of NTT’s debentures at the time of issuance?..
On January 1, 2008, PWC awarded stock options to two of its top managers, Price and Waterhouse. Price received options to purchase 25,000 shares of PWC $1 par common stock at an exercise price of $10/share. Waterhouse received 15,000 options to purch..
The 95% probability range is defined as the:
You are benefits consultant reviewing the disability coverage’s offered by one of your client firms. The disability plan of the firm offers provides short-term benefits equal to 100% of salary for 3 full years and long-term lifetime benefits equal to..
The dividend growth model is only useful for estimating a stock’s intrinsic value when the
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