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Comprehensive Financial Statement Analysis Part 2 - Q2 (a) - (b) The yard manager wants to purchase a new machine for $600,000 (total cost including delivery, installation and tax). Estimates it will save $110,000 a year for 7 years, with a residual value of $25,000 after 7 years. Required (a): Using NPV analysis, with the company's required rate of return of 7%, should the purchase be approved? (ignore depreciation tax impact) Show NPV calculation in table format by year or using annuity for years 1 - 7. 7% Year Amount Factor NPV
If the bank does hedge with the forward contract, what is the maximum amount it can lose?
The current price of a non-dividend paying stock is 50. in 6 months, it will be either 60 or 42.
Applied Nanotech is thinking about introducing a new surface cleaning machine. What is the base-case NPV? What is the revised NPV?
The useful lifetime of a test sample of a certain laptop battery is normally distributed with a mean of 750 charge-discharge cycles and a standard deviation of 125 cycles. How many batteries out of a 3000 battery sample would you expect to last fewer..
Using a stock of your choice calculate the return for it using the Capital asset pricing model. Assume an annualized return for the market at 6.86% and a risk free rare of 3.45%. Analyze and elaborate on your results against the last three years aver..
A stock is expected to pay the following dividends: $1.30 4 years from now, $1.60 5 years from now, and $1.90 6 years from now, followed by growth in the dividend of 8% per year forever after that point. There will be no dividends prior to year 4. Th..
ABC has decided to extend the terms of its trade credit from "net 10" to "net 15". How much will ABC's accounts receivable increase as a result of this change?
Hold the position until expiration. Determine the profits and graph the results. Identify the two breakeven stock prices and the maximum and minimum profits.
Consider two assets with expected return E(r1)=0.3, E(r2)=0.56; with variances σ12=0.1, σ22=0.25 and covariance σ12=0.15 . The risk free rate is 0.14. Find the normalized weight w1 and w2 of the efficient portfolio (the tangency portfolio) of risky a..
Stock A has an expected return of 10.1 percent and a beta of 1. Stock B has an expected return of 6.2 percent and a beta of 0.3. Both stocks have the same reward-to-risk ratio. What is the risk-free rate? That is, what would the risk-free rate have t..
What are the pros and cons of a centralized trading system with a clearinghouse?
Given the efficient markets belief that stock prices respond to news, explain this apparently contradictory price change.
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