Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
The company can purchase new planning software for $3,600. The software (asset) has a two-year life, will produce a savings of $600 in the first year and $4,200 in the second year. The discount rate is 15%. Calculate the project's payback and discounted payback period assuming steady cash flows. Also calculate the project's NPV and IRR. Should the project be funded? In light of the previous information provided, is the 15% discount rate justified. Explain your answer.
Concept Check: Payback analysis is the first step in project evaluation. The calculation enables you to understand if you can simply cover the investment within a certain time period. When doing Discounted Payback analysis or NPV analysis, a discounting rate is used to reduce future cash flows to a present value. The discount rate can be determined in many ways; existing cost of capital, projected cost of capital, desired return rate, etc as long as you justify what you wish to use for discounting cash flows and are consistent in your application evaluation will be easier.
Helpful Hint: IRR is discovered when you calculate an NPV where the result is zero (or as close to zero as you can get); this is an iterative process of adjusting the discount rate until you arrive at zero for an NPV. The best thing to do is first calculate NPV and see how far away from zero you are – you can then increase or decrease the discount rate until your NPV = zero.
The Nelson Company has $1,312,500 in current assets and $525,000 in current liabilities. Its initial inventory level is $375,000, and it will raise funds as additional notes payable and use them to increase inventory. What will be the firm’s quick ra..
What are the key features of a bond? How do you determine the value of a bond? What is the value of a similar 10-year bond? What would be the value of the bond described in part?
Chemtec is undertaking a project that will require an upfront investment today in net working capital, and plant and equipment (i.e., capital expenditures) of $100 million and $200 million, respectively. If there are no revenues or expenses expected ..
The expected return is 20% with a standard deviation due to currency movements of 5%. However, ten years ago Country Y's currency fell by 40%. How should Buxton assess this risk?
You are considering an investment in Keller Corp's stock, which is expected to pay a dividend of $1.75 a share at the end of the year (D1 = $1.75) has a beta of 0.9. The risk-free rate is 3.1%, and the market risk premium is 5.5%. Keller currently se..
Fairweather Corporation purchases merchandise on terms of 2/15, net 40, and its gross purchases (i.e., purchases before taking off the discount) are $800,000 per year. What is the maximum dollar amount of costly trade credit the firm could get, assum..
Fyre, Inc., has a target debt−equity ratio of 1.40. Its WACC is 8.3 percent, and the tax rate is 38 percent. If the company’s cost of equity is 15 percent, what is its pretax cost of debt? If instead you know that the aftertax cost of debt is 3.9 per..
Suppose that an investment earning 6% interest compounded continuously has a balance of $4500 after 4 years. Find the amount of the investment as follows: Write an equation by using the given information in the compound continuous interest formula.
Use the binomial option pricing model to find the value of a call option on £10,000 with a strike price of €15,000. The current exchange rate is €1.50/£1.00 and in the next period the exchange rate can increase to €2.40/£ or decrease to €0.9375/£. Th..
Zhdanov Inc. forecasts that its free cash flow in the coming year, i.e., at t = 1, will be -$10 million, but its FCF at t = 2 will be $20 million. After Year 2, FCF is expected to grow at a constant rate of 4% forever. If the weighted average cost of..
Raymond Supply, a national hardware chain, is considering purchasing a smaller chain, Strauss & Glazer Parts (SGP). Raymond's analysts project that the merger will result in the following incremental free cash flows, tax shields, and horizon values: ..
Even though firms follow the accounting rules (GAAP) when presenting their financial statements, it is still possible for conflicts of interest to exist between what management wants investors and creditors to see and the economic reality of transact..
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +1-415-670-9521
Phone: +1-415-670-9521
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd