Despite its promising technology

Assignment Help Financial Management
Reference no: EM13947264

Neptune Biometrics, despite its promising technology, is having difficulty generating profits. Having raised $85 million in an initial public offering of its stock early in the year, the company is poised to intro- duce a new product, an inexpensive fingerprint door lock. If Neptune engages in a promotional campaign costing $55 million this year, its annual after-tax cash flow over the next five years will be only $1 mil- lion. If it does not undertake the campaign, it expects its after-tax cash flow to be - $15 million annually for the same period. Assuming the company has decided to stay in its chosen business, is this campaign worthwhile when the discount rate is 8 percent? Why or why not?

Reference no: EM13947264

Questions Cloud

Introduce the client''s situation and identify the problems. : Prepare a formal use case narrative. This narrative should use a formal use case format and integrate the narrative into the use cases as suggested by agile development and other literature
System will be depreciated straight-line to zero : Your firm is contemplating the purchase of a new $630,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worth $70,000 at the end of that time. You will save $260,000 before..
Evaluate the introduction or literature review : Include the following information in your summary and critique of the journal article: Evaluate the Introduction/Literature Review. Comment on the statement of the research problem, question or hypothesis; organization, flow and content of the liter..
The net profit to a holder of a call option : The net profit to a holder of a call option, with a strike price of $1.540/British pound, premium that he paid of $.010 and spot rate of $1.510/ British pound is? The AUS$ spot rate is US$.8203/AUS$. The 9month forward rate is US$.8460/AUS$. What is ..
Despite its promising technology : Neptune Biometrics, despite its promising technology, is having difficulty generating profits. Having raised $85 million in an initial public offering of its stock early in the year, the company is poised to intro- duce a new product, an inexpensive ..
Financial statement method to forecast balance sheet : Balance Sheet as of December 31, 2013 (Thousands of Dollars) Cash $ 1,080 Accounts payable $ 4,320 Receivables 6,480 Accruals 2,880 Inventories 9,000 Line of credit 0 Total current assets $16,560 Notes payable 2,100 Net fixed assets 12,600. Use the f..
What is the expected return on pepsico stock : The value of R2 seems quite low. Does this mean the equation is invalid? Given the setting, why might one expect a low R2? Suppose the S&P index is expected to fall by 1 percent over the next month. What is the expected return on PepsiCo's stock?
What is an elliptic curve : What is the sum of three points on an elliptic curve that lie on a straight line?
Maximum cost-cost of capital for such risky projects : Scanlin, Inc., is considering a project that will result in initial aftertax cash savings of $1.78 million at the end of the first year, and these savings will grow at a rate of 2 percent per year indefinitely. The firm has a target debt−equity ratio..

Reviews

Write a Review

Financial Management Questions & Answers

  An investment project costs

An investment project costs $16,800 and has annual cash flows of $3,500 for 6 years. If the discount rate is zero percent, the discounted payback period is _________ years. If the discount rate is 5 percent, the discounted payback period is _________..

  Net value of the payments vs. receipts in todays dollars

Carol Thomas will pay out $18,000 at the end of the year 2, $20,000 at the end of year 3, and receive $22,000 at the end of year 4. With an interest rate of 11 percent, what is the net value of the payments vs. receipts in today's dollars?

  What would the annual yield to maturity be on bond

A few years ago, Spider Web, Inc. issued bonds with a 12.03 percent annual coupon rate, paid semiannually. The bonds have a par value of $1,000, a current price of $1,079, and will mature in 20 years. What would the annual yield to maturity be on the..

  What is the stocks expected rate of return

Jackson Corp. common stock paid $2.50 in dividends last year (D0). Dividends are expected to grow at a 12-percent annual rate forever. If Jackson's current market price is $40.00, what is the stock's expected rate of return (nearest .01 percent)?

  Identify specific fraud risk present

Identify specific fraud risk present during PwC's audits of the Lipper hedge funds. Explain how Pwc should have responded to the fraud risk factors that you identified.

  Investment in another that guarantees cash flow

Paltron Company made an investment in another that guarantees cash flow $ 22,500 each year for the next 5 years. If the company uses a discount rate of 15% on their investments, what is the present value of this investment?

  Calculate the share price for bills bakery if earnings grow

Bill’s Bakery expects earnings per share of $3.14 next year. Current book value is $5.1 per share. The appropriate discount rate for Bill’s Bakery is 13 percent. Calculate the share price for Bill’s Bakery if earnings grow at 4.8 percent forever.

  Why a central bank may wish to weaken value of its currency

Briefly explain why a central bank may wish to weaken the value of its currency. Explain why it would be difficult to maintain a fixed exchange rate between the euro and the dollar.

  What will be the effect of price increase on the firms fcf

Chip’s Home Brew Whiskey management forecasts that if the firm sells each bottle of Snake-Bite for $20, then the demand for the product will be 15,000 bottles per year, whereas sales will be 90 percent as high if the price is raised 10 percent. Chip’..

  Health care system has forecast net patient revenue

A health care system has forecast net patient revenue int he first 3 month of the year as follows. January $60 million, February $80 million, March $100 million. 60% of services are usually paid for in the month that they place and 40% in the followi..

  Evaluate optimal strategy of hedging

FHC Inc., a U.S. corporation, has an account payable due in 90 days. Use the following information to evaluate the optimal strategy of hedging its transactional exposure - MMHC Inc., a U.S. corporation, has an Euro-denominated account receivable i..

  What was cost of goods sold for the year

X Company, a manufacturer, reported the following inventory balance for 2012: What was Cost of goods sold for the year?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd