Determine the company rate of return on this investment

Assignment Help Financial Management
Reference no: EM131055238

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 problems. Revenues were $3 million in year 1, and increased by $1 million per thereafter through year 7. Determine the company's rate of return on this investment.

Reference no: EM131055238

Questions Cloud

Explain what is the bounded rationality : Explain what Bounded Rationality is. Then discuss how this concept can affect the decision situation in SLP 1. Also discuss how this concept can affect the data analysis in Case 1.
Applications of complex mathematical concepts : Investigate practical applications of complex mathematical concepts and gain understanding of how mathematics is used in engineering context.
Reduce staff availability and what adjustments : In long-term project planning, it is wise to assume that staff will be available for project work for less than 100 per cent of the total available time. What factors will reduce staff availability and what adjustments should be made for them?
Extrapolating the total development effort : The analysis effort and programming methods both rest on the principle of extrapolating the total development effort from detailed estimates of one phase of the project. Describe the approach taken in each of these methods and show in what circums..
Determine the company rate of return on this investment : 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..
Calculations within capital budgeting : Define and discuss implementation of the following calculations within capital budgeting: IRR, NPV, and Marginal Cost of Capital. When would these be used and what do they tell us?
Restaurant supplies expects its revenues and payments : Eddie's Bar and Restaurant Supplies expects its revenues and payments for the first part of the year to be: Sales payments January $24,000 $18,000 February $20,000 $21,300 March $35,000 $19,100 April $22,000 $22,400 May $28,000 $14,700 Eighty percent..
Major network security organizations : As a member of the Network Security group, you have been asked to serve on the committee and to take the initiative in the following Describe the major network security organizations.
Efficient use of the computing hardware : We have stressed the need for an operating system to make efficient use of the computing hardware. When is it appropriate for the operating system to for sake this principle and "waste"resources? Why is such a system not really wasteful.

Reviews

Write a Review

Financial Management Questions & Answers

  Relationship between interest rate and length of the annuity

Let’s explore retirement planning analysis by calculating the data and sketching a graph that shows the relationship between interest rate and length of the annuity, i.e. the period that monthly withdrawals are made from the retirement account. Deter..

  Fixed rate mortgage with monthly payments

You are buying a house and will borrow $215,000 on a 30-year fixed rate mortgage with monthly payments to finance the purchase. Your loan officer has offered you a mortgage with an APR of 4.45 percent. What are the most points you would be willing to..

  Which project is financially acceptable

Assume that you are the chief financial officer at Porter Memorial Hospital. The CEO has asked you to analyze two proposed capital investments – Project X and project Y.  Calculate each project’s payback, NPV and IRR Insert your response here. Which ..

  Usually the members of a limited liability company

Usually the members of a limited liability company:

  What is the projects expected rate of return

If a security plots below the security market line, it is: A project has an assigned beta of 1.24, the risk-free rate is 3.8%, and the market rate of return is 9.2%. What is the project's expected rate of return? A project with higher than average ri..

  Premium bond making semi-annual payments

Bond X is a premium bond making semi-annual payments. The bond pays a 7 percent coupon, has a YTM of 5 percent, and has 13 years to maturity. Bond Y is a discount bond making semi-annual payments. This bond pays a 5 percent coupon, has a YTM of 7 per..

  Using the straight-line method-recorded interest expense

A company issued five-year, 7% bonds with a par value of $175,000. The market rate when the bonds were issued was 6.5%. The company received $198,975 cash for the bonds. Using the straight-line method, the amount of recorded interest expense for the ..

  How should depreciation of a firms home currency affect

Currency effects on cash flows. How should appreciation of a firm's home currency generally affect its cash inflows? How should depreciation of a firm's home currency generally affect its cash outflows?

  Relationship between yield to maturity and bond prices

Which of the following statements about the relationship between yield to maturity and bond prices is false?

  Considered difficulty with regards to the CAPM

Which of the following is not considered a difficulty with regards to the CAPM?

  What are the cash flows for this replacement project

Five years ago, Domingo Pizzeria Company purchased an oven for $30,000. The projected life of the oven was 10 years with zero salvage value (depreciating at $3,000 a year.) The current book value of the oven is $15,000, whereas the current market val..

  What is the companys pretax cost of debt

Waller, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 14 years to maturity that is quoted at 104 percent of face value. The issue makes semiannual payments and has an embedded cost of 8 percent annually. Wh..

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