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Consider two mutually exclusive new product launch projects that Nagano Golf is considering. Assume the discount rate for Nagano Golf is 16 percent. (Do not round intermediate calculations. Round your "PI" answers to 3 decimal places (e.g., 32.161) and other answers to 2 decimal places. (e.g., 32.16)) Project A: Nagano NP-30. Professional clubs that will take an initial investment of $740,000 at time 0. Next five years (Years 1–5) of sales will generate a consistent cash flow of $340,000 per year. Introduction of new product at Year 6 will terminate further cash flows from this project. Project B: Nagano NX-20. High-end amateur clubs that will take an initial investment of $970,000 at Time 0. Cash flow at Year 1 is $290,000. In each subsequent year cash flow will grow at 10 percent per year. Introduction of new product at Year 6 will terminate further cash flows from this project. Year NP-30 NX-20 0 –$ 740,000 –$ 970,000 1 340,000 290,000 2 340,000 319,000 3 340,000 350,900 4 340,000 385,990 5 340,000 424,589 Complete the following table: NX-30 NX-20 Payback years years IRR % % PI NPV $ $
How much would you have to invest today to receive? $6,000 each year for 10 years at 9 percent?
Quantitative Problem: Barton Industries expects that its target capital structure for raising funds in the future for its capital budget will consist of 40% debt, 5% preferred stock, and 55% common equity. What is the firm's weighted average cost of ..
Round Table Rental Yards provides construction equipment, trailers, crutches, etc., on short term rentals. Historically, Art, the owner, has purchased the items that he rents out, but his business has been expanding so rapidly that he is also conside..
Last year the Selling Corporation had earnings before interest and taxes (operating income) equal to $1 million. It paid $200,000 in dividends to its stockholders and $100,000 in interest to its creditors. During the year, the company also repaid a b..
A 5.65 percent coupon bond with 18 years left to maturity is offered for sale at $1035.25. What yield to maturity is the bond offering?
A small start-up company invested in a new plant with an initial cost of $10 million. Operating costs for the plant were $3 million per year for 7 years. There was a special one-time charge of $1 million in year 2 to correct unexpected equipment prob..
On Oct 10, 2015, gold on the spot market is at $1,000 an ounce. A forward gold contract for delivery of gold on Oct 10, 2016 is priced at $1,030. Three months pass and spot gold is still at $1,000. What should be the approximate price of the Oct 10, ..
Calculate the financial breakeven point, and the earnings per share for each structure assume a 40% tax rate on ordinary income. Graph the two capital structures on the same set EBIT- EPS axes. Compute the degree of financial leverage with each struc..
Suppose 1 year ago, Miller Company had inventory in Britain valued at 1.5 million Swiss francs. The exchange rate for dollars to Swiss francs was 1 franc=1.15 dollars. Today, the exchange rate is 1 Swiss franc=1.06 U.S. dollars. The inventory in Swit..
The return on a foreign bond is the sum of the yield over the holding period plus any capital gain/loss, plus currency gain/loss. A short hedge involves selling futures contracts to cover the risk on a position in the spot market.
A stock sells for $50. The next dividend will be $4 per share. If the return on equity ROE is a constant 10% and the company reinvests 40% of earnings in the firm, what must be the opportunity cost of capital?
Frasier Cabinets wants to maintain a growth rate of 5 percent without incurring any additional equity financing. The firm maintains a constant debt-equity ratio of .55, a total asset turnover ratio of 1.30, and a profit margin of 9 percent. What must..
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