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The Delta Publishing Company is considering two mutually exclusive expansion plans. Plan Alpha calls for the expenditure of $50 million on a large-scale, integrated plant that will provide an expected cash flow stream of $8 million per year for 20 years. Plan Beta calls for the expenditure of $15 million to build a somewhat less efficient, more labor-intensive plant that has an expected cash flow stream of $3.4 million per year for 20 years. The firm's cost of capital is 10%.
a. Calculate each project's NPV and IRR. (I have already accomplished this step)
b. Set up a Project delta by showing the cash flows that will exist if the firm goes with the large plant rather than the smaller plant. What are the NPV and IRR for this Project delta?
c. Give a logical brief explanation, based on reinvestment rates and opportunity costs, as to why the NPV method is better that the IRR method when the firm's cost of capital is constant at some value such as 10%.
Company A currently purchase CDs from many Vendors at various rates per pack. They do not have guaranteed orders with any vendors, and are planning to make consolidated order and reduce overall price.
How much will Jane have in her retirement account immediately after she makes her last contribution in Year 40, assuming a return on her investments of 9%?
Valdilla's Music Store acquired Land and old buildling in exchange for 50,000 shares of its common stock, par $0.50 and cash of $80,000.
A $100 000 7.5% bond with 7years to maturity is sold for $93 250. What is its yield, if interest is paid 6-monthly?
Illustrate the role of supply-chain management in the global movement of goods from one country to another, and explain its overall impact on local trade. Support your answer with examples of such an impact in action.
You and your best friend have decided to quit your jobs, turn in your retirement, and purchase your own restaurant. In your market area there are a lot of restaurants, and you've looked at several that were available for sale.
Select a corporation at that your organization may consider a competitor. Then, using the example of high-low calculations for breakeven, compute that organization's break-even point in sales dollars.
In the recent discussion memorandum, Distinguishing between Liability and Equity Instruments and Accounting for Instruments with the Characteristics of Both, the FASB addressed issue of whether redeemable preferred stock is debt or equity.
A local Bank is offering a thirty year mortgage with an EAR of 5 3/8%. If we plan to borrow $150,000, what will our monthly payment be? You have decided to refinance your mortgage and plan to borrow whatever is outstanding on your current mortgage.
Your portfolio consists of $50,000 invested in Stock X and $50,000 invested in Stock Y. Both stocks have an expected return of 15 percent, a beta of 1.6, and a standard deviation of 30 percent.
An asset costs $100,000 and will create cash benefits of $30,000 at the end of each year for five years for Hartford company. Salvage value are $50,000, $40,000, and $0 at the end of year 3, year 4, and year 5 respectively.
Make a final payoff diagram for a stock and a bond.
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