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1. Calculate the net present value of a project with a net investment of $20,000 for equipment and an additional net working capital investment of $5,000 at time 0.
The project is expected to generate net cash flows of $7,000 per year over a 10-year estimated economic life. In addition, the net working capital will be recovered at the end of the project.
The required return on the project is 11 per- cent and the company has a marginal tax rate of 40 percent. What is the meaning of the computed net present value figure?
2. Calculate the internal rate of return and profitability index for a project that is expected to generate eight years of annual net cash flows of $75,000. The project has a net investment of $360,000 and the required return on the project is 12 percent.
The firm’s weighted average cost of capital is 11%, and it has $1,500,000 of debt at market value and $400,000 of preferred stock at its assumed market value. The estimated free cash flows over the next 5 years, 2016 through 2020, are given below. Be..
Calculating Returns [LO1] Suppose you bought a bond with an annual coupon of 7 percent one year ago for $970. The bond sells for $940 today. What was your total nominal rate of return on this investment over the past year?
Keller Cosmetics maintains an operating profit margin of 8.60% and a sales-to-assets ratio of 3.10. It has assets of $620,000 and equity of $420,000. Interest payments are $42,000 and the tax rate is 35%. a. What is the return on assets? What is the ..
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Written Assignment: You have decided to invest in an equally weighted portfolio consisting of American Express, Proctor & Gamble, Home Depot, and E. I. du Pont and need to find the beta of your portfolio. Go to finance.yahoo.com, find the ticker symb..
Sisters Haruhi and Mikuru are the joint owners of Seto Corporation; each owns 50% of the company. The value of the corporation is $450,000 and its risk in terms of σ is 0.3. Haruhi would like to buy Mikuru out and offers her cash, equivalent to Mikur..
Gregg Company recently issued two types of bonds. The first issue consisted of 20-year straight (no warrants attached) bonds with an 6% annual coupon. The second issue consisted of 20-year bonds with a 5% annual coupon with warrants attached. Both bo..
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Dr. Ima N. Pain has a patient that had $3,000 in services done. The customer cannot pay until a year from now. Dr. Ima earns a 5% return on her money. How much should she charge the patient if the patient will pay the bill in one year?
FITCO Inc. is a Pharmaceutical company which is considering investing in a new equipment for the production of pain-reliever machine for individuals who suffer from cardio vascular diseases. Calculate the initial outlay of the project. Calculate the ..
Acme Services’ CFO is considering whether to take on a new project that has average risk. She has collected the following information: • The company has outstanding bonds that mature in 26 years. The bonds have a face value of $1,000, an annual coupo..
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