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Howell Petroleum is considering a new project that complements its existing business. The machine required for the project costs $3.98 million. The marketing department predicts that sales related to the project will be $2.68 million per year for the next four years, after which the market will cease to exist. The machine will be depreciated down to zero over its four-year economic life using the straight-line method. Cost of goods sold and operating expenses related to the project are predicted to be 30 percent of sales. Howell also needs to add net working capital of $330,000 immediately. The additional net working capital will be recovered in full at the end of the project’s life. The corporate tax rate is 39 percent. The required rate of return for Howell is 15 percent. What is the value of the NPV for this project?
Inflation has remained low for the past three years but you have come to the conclusion that trend is ending and inflation will increase significantly over the next 18 months. Assume you have reached this conclusion prior to other investors reaching ..
Find the present value of $600 due in the future under each of these conditions: 16% nominal rate, semi annual compounding, discounted back 4 years. 16% nominal rate, monthly compounding, discounted back 1 year.
Winston’s has 18,000 shares outstanding with a book value of $348,000 and a market value of $501,660 and has net income of $21,000. The firm is considering a project with a net present value of $4,500 that would require the purchase of $175,000 of fi..
EMC Corporation has never paid a dividend. Its current free cash flow of $370,000 is expected to grow at a constant rate of 4.7%. The weighted average cost of capital is WACC = 11.75%. Calculate EMC's estimated value of operations. Round your answer ..
Futures Contracts describe the general characteristics of a futures contract. How does a clearinghouse facilitate the trading of financial futures contracts? Futures Pricing how does the price of a financial futures contract change as the market pric..
What is a financial market? How are financial markets differentiated from markets for physical assets? Differentiate between money markets and capital markets.
A project has an initial cost of $62,575, expected net cash inflows of $13,000 per year for 9 years, and a cost of capital of 13%. What is the project's PI? Do not round your intermediate calculations. Round your answer to two decimal places.
What is meant by money market mutual funds “breaking the buck”? Why is the pricing of money market mutual funds important?
You deposit 5% of your $40,000 annual income in a 401(K) plan at the end of each year. Your employer matches 2% of your earnings. You expect the plan to earn 10% and you are in the 25% tax bracket. What is your annual investment? What is your one yea..
Consider the different uses of free cash flow to a firm. Which use is the most optimal? Does the cost of capital matter in your decision? Defend your answer and cite your sources.
Collecting and using personal data: consumers' awareness and concerns
Evaluate two types of deception one with which you agree and one with which you disagree. Provide an example and rationale for each type.
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