A large automobile manufacturing company is considering the installation of a high-tech handling system. The initial cost of the system is $3,000,000 and it is estimated it will save $750,000 per year in manual labor, and will incur $27,500 in operating expense the first year increasing by $100 per year for every year thereafter. The salvage value at the end of the system’s 10 year life will equal the cost of removal. The company’s MARR is 12%. a. Show your cash flow diagram from the company’s perspective. b. Calculate either the PW, AW, or FW for this project. Based on your calculation, should this project be recommended for investment? State your reason for either accepting or rejecting this project. c. Use Excel to determine this project’s IRR. Based on your value for IRR, should the project be accepted or rejected? Why or why not. d. If this project was externally funded and the external financing rate, ?, was 15%, use the external rate of return methodology to solve for ERR. Based on your findings, would you still recommend this project for funding? Provide detail that supports your recommendation. e. To help finance this project, the company marketed a $3,000,000 ten-year bond paying 10% APR paid semi-annually. You have personally researched this company and feel confident this company will have the cash available to pay its debt of $3,000,000 when the bond becomes due and you also feel confident that the company has the liquidity (available cash) to pay its semi-annual interest payments to its bond holder as they become due over the life of the bond. Five years has passed and you notice this bond is available for sale. You plan to purchase this bond and hold it until it matures in 5 years. How much should you pay for this bond if you require an 8% return?

Considering the installation of high-tech handling system : A large automobile manufacturing company is considering the installation of a high-tech handling system. Use Excel to determine this project’s IRR. Based on your value for IRR, should the project be accepted or rejected? Why or why not. Use Excel to.. |

What will your total dividend amount be in year two : You own 1,000 shares of stock in Avondale Corporation. You will receive a $0.80 per share dividend in one year. In two years, Avondale will pay a liquidating dividend of $35 per share. The required return on Avondale stock is 16 percent. You only wan.. |

Dismantle the project after first year and sell components : You are considering a new project. In the first year, you expect to sell 9000 units at $50 net cash apiece, giving you operating cash flow of $450,000. At theend of the first year, you will know whether the project is doing “well” or doing “poorly.” .. |

What is the book value of the mortgage : An investor wants to purchase a mortgage from the local bank. The original loan amount was $300,000 for 30-years at an interest rate of 4%. The loan was made three (3) years ago. If the investor requires a 4.5% return, how much will be paid for the m.. |

Considering the installation of high-tech handling system : A large automobile manufacturing company is considering the installation of a high-tech handling system. The initial cost of the system is $3,000,000 and it is estimated it will save $750,000 per year in manual labor, You plan to purchase this bond a.. |

Adopted policy of increasing the annual dividend : Atlas Mines has adopted a policy of increasing the annual dividend on its common stock at a constant rate of 2.75 percent annually. The firm just paid an annual dividend of $1.67. What will the dividend be six years from now? |

Made two announcements concerning its common stock : Sessler Manufacturers made two announcements concerning its common stock today. First, the company announced that the next annual dividend will be $1.75 a share. Secondly, all dividends after that will decrease by 1.5 percent annually. What is the ma.. |

Expected to pay dividends over the next four years : Apocalyptica Corporation is expected to pay the following dividends over the next four years: $6.20, $17.20, $22.20, and $4.00. Afterward, the company pledges to maintain a constant 5.5 percent growth rate in dividends, forever. If the required retur.. |

No dividends will be paid on stock over the next eight year : Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next eight years, because the firm needs to plow back its earnings to fuel growth. The company will then pay a dividend of $16.50 per share 9 years.. |

## Assume no taxes and no new capital expendituresLast year your firm had revenue of $27.5 million, cost of goods sold (COGS) of $14.0 million, Selling, General, & Administration costs (SG&A) of $2.5 million, Account Receivables (AR) of $8.5 million, Account Payables (AP) of $7.0 million and Invento.. |

## Savings account at bank and made an initial depositYou opened a savings account at a bank and made an initial deposit. The account pays 8% interest compounded annually. You made no additional deposits and in exactly one year you close the account and take out off of the money. The balance at the time.. |

## Stated yield to maturity-expected yield to maturityA 9-year bond of a firm in severe financial distress has a coupon rate of 10% and sells for $940. The firm is currently renegotiating the debt, and it appears that the lenders will allow the firm to reduce coupon payments on the bond to one-half the .. |

## What was average real risk-free rate and premiumYou’ve observed the following returns on Crash-n-Burn Computer’s stock over the past five years: 16 percent, –5 percent, 19 percent, 13 percent, and 10 percent. Suppose the average inflation rate over this period was 2.2 percent and the average T-bil.. |

## Which loan has the lowest annual costLast national bank is offering you a loan at 10%; payments on the loan are to be made monthly. Credit Onion is offering you a loan where payments are to be made semi-annually; the rate on the loan is also 10%. A local bank down the street is also off.. |

## Determine the eoq-conditions stated above holdP15–5 EOQ analysis Tiger Corporation purchases 1,200,000 units per year of one component. The fixed cost per order is $25. The annual carrying cost of the item is 27% of its $2 cost. Determine the EOQ if (1) the conditions stated above hold, (2) the .. |

## What is the yield to maturity on treasury stripsWhat is the yield to maturity on a Treasury STRIPS with 11 years to maturity and a quoted price of 63.695? |

## Average value of unpaid billsOn average, it takes Microlimp's customers 60 days to pay their bills. If Microlimp has annual sales of $500 million, what is the average value of unpaid bills? |

## What is the companys average balance in accounts payableABC Company has a cash cycle of 11.15 days, an operating cycle of 23.99 days, and an average collection period of 5 days. The company reported cost of goods sold of $233,840. What is the company's average balance in Accounts Payable? |

## Prepare loan amortization scheduleMessineo LLC borrowed $15,000 at a 14% annual rate of interest to be repaid over 3 years. The loan is amortized into three equal annual end of year payments. As the CFO of Messineo, LLC you must prepare a report of the pertinent information in a shor.. |

## Depreciation expense and interest expenseHamble, Inc., has sales of $19,070, costs of $10,460, depreciation expense of $2,530, and interest expense of $1,600. If the tax rate is 35 percent, what is the operating cash flow, or OCF? |

## Further processing of aluminum in to produce rolled aluminumThe management of Dorsch Aluminum Co. is considering whether to process aluminum ingot further into rolled aluminum. Rolled aluminum can be sold for $4,100 per ton, and ingot can be sold without further processing for $2,400 per ton. Prepare a report.. |

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