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USING EXCEL CAPITAL BUDGETING MONTH BY MONTH There’s a piece of land (0.44 acres) on sale just off Kennedy Blvd, and you are thinking about buying the land, developing it into an office building and eventually selling it. The seller of the land asked for $600,000. The general contractor says that he can develop it for you and build the office in just one year. You plan to do a month-by-month capital budgeting and see if you should proceed with this investment. If you buy the land today, your cost is the price of the land plus 2% fee for titling, real estate broker, etc. Starting in month 1, your general contractor will take care of the rest, including site development and construction. He asks for $40,000 per month for everything. After 12 months, the building will be done and you will try to sell it for $2 million. Your income tax rate is 33%. You also agree to pay 5% to your real estate agent when it’s sold. The appropriate discount rate for this project is 8% annually. Now you have all the numbers in front of you, you want to (1) Decide whether you should take this investment or not. (2) Create a NPV profile HOR VER AXIS LABELS AND LEGEND (3) Do a sensitivity analysis and scenario analysis to get a better picture of the risk you are facing. You are free to choose your own variables and create your own scenarios. (4) HOMEWORK 2 You might not be able to afford the cost of construction towards the end, you need to get a $100,000 loan from the bank. After talking to Fifth Third Bank, they agreed to offer you a 10-year loan of $100,000 with fixed monthly payments and floating interest rates. Your interest rates will be 3.5% for the first 2 years, 3.2% for the next 3 years, 3% for the last 2 years and 2.8% for the last 3 years. You want to create a loan amortization table to figure out what your payments look like.
Your firm has an average collection period of 24 days. Current practice is to factor all receivables immediately at a 1.40 percent discount. What is the effective cost of borrowing in this case?
How are futures options used and what are the reasons for their popularity compared to spot options?
At what rate have sales been growing? Suppose someone made this statement: "Sales doubled in 5 years.
Investment Bankers often become involved with the mergers and acquisitions of firms. So, why might a firm need an investment banking firm to both initiate and complete either the merger or acquisition of a firm...and, tell us what the difference is b..
You run a mail-order firm. You are considering replacing your manual ordering system with a computerized system, What is the net present value of this project?
What are the promised coupon payments to each of the classes during the first quarter? What is the total interest payment due? If the trustee received a payment of $4,834,796, how would the payment be applied? Assume that for the first year the trust..
Once financial statements are made public, the external analysis of the company begins by. __ employer businesses (businesses that employ others besides the owners) will close within the first six years
You are a city Planner who is considering buying an automated trash truck with a robotic arm to pick up the cans. The initial investment will be $4,500,000 immediately. using the NPV decision rule, calculate NPV and state whether u accept or reject. ..
Using the following information, what is the firm's Inventory Conversion Period?
As the basis of your Play Money Paper, you are to pick your stocks this week and submit them here in the week 5 discussion conference to get everyone's feedback. In addition, you must provide a brief explanation for each of your investments and the ..
You own a portfolio equally invested in a risk-free asset and two stocks. One of the stocks has a beta of 1.13 and the total portfolio is equally as risky as the market. Required: What must the beta be for the other stock in your portfolio?
FITCO Inc. is a Pharmaceutical company which is considering investing in a new equipment for the production of pain-reliever machine for individuals who suffer from cardio vascular diseases. Calculate the initial outlay of the project. Calculate the ..
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