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The City of Swimfield is building a new pool. The pool will cost $1.5 million to construct in year one. The pool will open in year two and will need another capital investment of $150,000 in year eleven. Annual revenues are estimated at $250,000 per year. Annual expenses are estimated at $125,000 per year.
a) All costs and benefits accrue at the end of each year. Using a 3.5% discount rate, calculate the NPV and BCR for the pool project over the next 21 years. What is the NPV for the pool?
b) What is the BCR for the pool? Round your answer to two decimal places.
Round your answer to the nearest whole dollar.
George and Margaret Wealthy are in the 42 percent tax bracket, considering both federal and state personal taxes. Norman Briggs, then CEO of Community General Hospital, has been aggressively pursuing the couple to contribute $400 thousand to the hosp..
Capital budgeting criteria: ethical considerations An electric utility is considering a new power plant in northern Arizona. Power from the plant would be sold in the Phoenix area, where it is badly needed. Because the firm has received a permit, the..
Assume the Black-Schools framework. Let S be a stock such that S(0) = 21, the dividend rate is δ = 0.02, the risk free rate is r = 0.05, and the volatility is σ = 0.2. (a) Calculate the expected payoff of a 6 month call with strike price 17. (b) Calc..
Assume that next year, we can have three possible states of world with the following probabilities of occurring: 20%, 45%, and 35%. The returns of an asset in each state are 18%, 5%, and -8%. What is the expected return for this asset?
Aria Acoustics, Inc. (AAI), projects unit sales for a new seven-octave voice emulation implant as follows: Year Unit Sales 1 88,000 2 101,000 3 115,000 4 110,000 5 91,000 Production of the implants will require $1,670,000 in net working capital to st..
In September, 2008, the IRS changed tax laws to allow banks to utilize the tax loss carry forwards of banks they acquire to shield their future income from taxes (prior law had restricted the ability of acquirers to use these credits).
Stock R has a beta of 1.5, Stock S has a beta of 0.75, the expected rate of return on an average stock is 13%, and the risk-free rate is 7%. By how much does the required return on the riskier stock exceed that on the less risky stock?
The third year of depreciation on business furniture costing 10,000 purchased in March 2010, using half-year convention and accelerated depreciation
Recall the mechanism behind continuous compounding: the whole period is divided into increasing numbers of smaller and smaller sub-periods, and the resulting effective rate is calculated as a limit of the effective rates under increasing number of su..
A company currently pays a dividend of $2.75 per share (D0 = $2.75). It is estimated that the company's dividend will grow at a rate of 17% per year for the next 2 years, and then at a constant rate of 6% thereafter. What is your estimate of the stoc..
You read in The Wall Street Journal that 30-day T-bills are currently yielding 5.5%. Your brother-in-law, a broker at Safe and Sound Securities, has given you the following estimates of current interest rate premiums:
A put option is currently selling for $5.70. It has a strike price of $50 and seven months to maturity. The current stock price is $57. The risk-free rate is 4.6 percent, and the stock will pay a $2.70 dividend in two months. What is the price of a c..
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