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!
Background Data
COMM Company is considering an investment in a new inventory control system. The system will require a substantial up-front investment but is expected to provide annual cash cost savings for the next 6 years. At the end of that year (year 6) the used system is likely to be outdated (but still functional) and will be sold for an estimated 10% of original cost. (The equipment is sold at the end of year 6) The system falls under the 7 year IRS depreciation guidelines (assume straight line depreciation full year every year). (Congress mandates tax related depreciation guidelines). The system is expected to become operational at a cost of $2,100,000. Annual cash cost savings (primarily due to labor cost savings) are expected to average $500,000. COMM is in the 35% combined federal and state tax bracket and uses a hurdle rate of 10% to evaluate capital projects.
Required
1. Prepare an exhibit that displays the outcome of your capital budgeting model’s NPV related calculations. The exhibit should clearly show each event that has a cash flow impact and the project's Net Present Value (you can use the model we developed in class or set up your own MS Excel model).
2. Is the project’s IRR more or less than the hurdle rate of 10%? How do you know? Within a range of 1 percentage point (for example 6% - 7%) where does the IRR on this project fall?
3. Capital Budgeting models (like all forecasts) are driven primarily by educated assumptions about outcomes. Which actual outcomes are most subject to deviation from expected outcomes? Why?
Discuss various strategies to put in place that would reduce disbursement costs and you are the financial manager for a mid-sized company with 10 locations throughout the United States.
Grandin Inc. is evaluating its dividend policy. It has a capital budget of $602,000, and it wants to maintain a target capital structure of 60% debt and 40% equity. The company forecasts a net income of $447,000. If it follows the residual dividend p..
You have $12,000 to invest in a stock portfolio. Your choices are Stock X with an expected return of 11 percent and Stock Y with an expected return of 8 percent. If your goal is to create a portfolio with an expected return of 9.59 percent, how much ..
The Ape Copy Company's preferred stock pays an annual dividend equal to $16.50. If investors demand a return equal to 11 percent to purchase Ape's preferred stock, what is its market value?
One way to calculate a stock's beta is to- calculate the stock's coefficient of variation. calculate both the stock's mean return and the std.dev. of the returns.
What is the amount a person would have to deposit today to be able to take out $5000 a year for 10 years from an account earning 8 percent annually?
Break-even Financing. Lakeland, Inc., is a U.S.-based MNC with a subsidiary in Mexico. Its Mexican subsidiary needs a one-year loan of 10 million pesos for operating expenses. Since the Mexican interest rate is 70 percent, Lakeland is considering b..
Tony borrowed $10,000 from his sister at 8%, simple interest, and repaid the entire amount after 5 years. Show the cash flows on this deal.
Use the Internet to research the Apple Corporation, its current position and reputation regarding ethical and social responsibility, and the strategies that it currently employs to market its products.
A new machine can be purchased for $1,800,000. It will cost $35,000 to ship and $15,000 to fine-tune the machine. The new machine will replace an older version that is fully depreciated and will be sold for $200,000. The firm's income tax rate is 35%..
Suppose the government increases spending by $30 billion and raises taxes at by $20 billion at the same time. Then,
A project that provides annual cash flows of $12,300 for 9 years costs $70,836 today. If the required return is 3 percent, the NPV for the project is $ _________ and you would accept the project. At a discount rate of _________ percent, you would be ..
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