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The managers of Merton Medical Clinic are analyzing a proposed project. The project's most likely NPV is $120,000, but, as evidenced by the following NPV distribution, there is considerable risk involved:
Probability NPV0.05 -$700,0000.2 -$250,0000.5 $120,0000.2 $200,0000.05 $300,000
a.) What are the project's expected NPV and standard deviation of NPV? (show your work)
b.) Compute the CV? (show your work)
c.) Should the base case analysis use the most likely NPV or expected NPV? Explain your answer.
Q1) The 12-month, 15-month, 18-month zero rates are 7.4%, 7.5%, 7.6% with continuous compounding. What is the value of an FRA that enables the holder to earn 8.6% (with semiannual compounding) for a 6-month period starting in one year on a principal ..
In 1965, Warren Buffett get control of a New England textile business called Berkshire Hathaway for about $10 per share. Today the stock sells for around $135,000 a share and Mr. Buffett is the 2nd richest person in America.
What is the net cash flow of this arbitrage strategy at the option expiration date, assuming that Stock XLT trades at $23 at expiration three months from now?
The ABC Company has decided to build a new facility for its R&D department. The cost of the facility is estimated to be $125 million. ABC Company wants to finance this project using its traditional debt-equity ratio of 1.5.
At expiration, 3 months later, the stock price is $56.75. All other things being equal and given an annual interest rate of 4.0%, what is the net profit or loss to the investor?
Calculate the call value of Owens Corning warrants. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
General Eclectic Company is planning three possible capital investment projects. The projected returns depend on the future state of the economy as given here.
What are the calculations involved with pricing a bond and a stock?
Construct a pro forma income statement for the first year and second year for the following assumptions.
Consider the following probability distribution of returns for Alpha Corporation: Evaluate the expected return for Alpha Corporation. Calculate the standard deviation of return on Alpha Corporation.
Peter land a loan of $328,337.1919 from George. The loan will be repaid over the next twenty-four years, beginning from the end of the next years. The Real interest expense for the first year is $15,785.44189.
A: Breakeven problem: What is the breakeven volume when the fixed costs are $60,000.
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