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!
A company has developed improvements to a product line. The plant can be converted in one of two ways. For $19.5 million the plant (Type 1) will be able to produce three models of a vacuum cleaner, which all rely on similar parts. For an extra $3.5 million (total initial investment of $23 million) the plant (Type 2) can be equipped with assembly machinery that would allow it produce a much larger range of models of vacuums. Analysts at the company believe that there is a 60% chance that demand for the vacuum line will be high and 40% that demand will be low. The after-tax incremental cash flows for the vacuum are shown in the following table. All amounts are in thousands (000s) and arrive at year end.
Year 1 2 3 4 5 6High Demand (60%) cash flow 5000 7000 9000 9000 9000 9000Low Demand (40%) cash flow 1200 1200 1200 1200 1200 1200Weighted average after-tax cash flow 3480 4680 5880 5880 5880 5880
For $500,000 the Type 2 plant can be switched between vacuum size categories. If demand for the vacuum is low during the first year, the plant can be modified to one of the company's flagship intermediate vacuums. The cash flows presented in the bottom row below show the $500,000 switching cost at the end of Year 1 ($1.2 million from low vacuum sales less the $500,000 switching cost and a series of $4 million cash flows for Years 2 through 6. All amounts are in thousands, so 5000 is $5 million.
Year 1 2 3 4 5 6Vacuums Low Demand CFs 1200 1200 1200 1200 1200 1200Cash flows after switching 700 4000 4000 4000 4000 4000
A. Compute the NPV of the Type I plant using a 12% discount rate.B. Compute the NPV of the Type II plant using a 12% discount rate and assuming that if vacuum demand is low that the plant switches to the production of intermediate size cars after Year 1.
Determine the effective quarterly rate and the nominal annual rate, What is the spreadsheet function to find the nominal annual rate above
Assume as a VC that you want to establish a pre- and post-money valuation in support of the issuance of a term sheet
Stephens Development Company paid a dividend of$1.12 over the last 12 months. the dividend is expected to grow at a rate of 20% over the next 3 years(supernormal growth).
Find out the present value of ordinary annuity which pays $4,800 per year for eight years, supposing the annual discount rate is seven percent?
Suppose you withdraw the interest every year. What will be your total earnings? Why does this differ from the interest earned in (a)?
by using the proper PV Table and supposing a 12% annual interest rate, find out the present value on December 31, 2009 of the five period annual annuity of 10000 under each of following situations:
Applying the Mark-to-market method, what will Novi Company show on its balance sheet at the end of 2006 to reflect its investment in Troy Company?
What do you mean by the “agency cost” or “agency problem”? Do these interfere with maximizing shareholder wealth? Explain why or why not?
Determined the multiple cash flows for a year and the semi-annual annuity payment that will pay off over six years, a $9,860 debt owed today if R=13%
The company X has been in business for 100 years. For the last 3 years this company reported operating losses. Which set of financial statement users is most likely to be influenced by this earnings management?
Calculation of financial leverage, operating and combined leverage and the firm's direct labor costs increase as a result of a new labor contract
Explain Decision making based on the NPV and Profitable index and IRR criterion
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