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A heat exchanger is being installed as part of a plant modernization program. It costs $80,000, including installation, and is expected to reduce the overall plant fuel cost by $20,000 per year. Estimates of the useful life of the heat exchanger range from: an optimistic (with probability 15%) 12 years to a pessimistic (with probability 5%) 4 years with probability 15%. The most likely (with probability 80%) value is 5 years. Assume the heat exchanger has no salvage value at the end of its useful life.
a) Determine the pessimistic, most likely, and optimistic rates of return.
b) Use the range of estimates to compute the mean life and determine the estimated before-tax rate of return.
c) What is the expected value of the rate of return?
I invested $15,000 today in a fund that earns 8 percent compounded yearly. To what amount will the investment grow in 3 years?
Suppose that Vermont Corporation has net payables of 200,000 Mexican pesos in 180 days. The Mexican interest rate is seven percent over 180 days, and the spot rate of the Mexican peso is $.10.
Data Back-Up Systems has obtained a $10,000, 90-day bank loan at an annual interest rate of 15 percent, payable at maturity. Suppose 365 day year.
Explain how expected rate of return used to value stock.
Determine Tech Products’ economic order quantity (EOQ) for motors? Compute its total cost at the EOQ?
Determine the correct statement regarding profit sharing plans.
As a result, the company's earnings and dividends are declining at the constant rate of 5% per year. If D0 = $6 and rs = 18%, what is the value of Brushy Mountain's stock? Round your answer to the nearest cent.
What is "present value"? What is an example of the "present value" concept? How does single cash flow present valueexample differ from an annuity computation?
What is the effect of spot volatility and mean reversion in Hull White model? Describe considering 2 swaptions expiry 5 Years maturity 2 Years, expiry 4 Years maturity 2 Years.
Kresler Autos has preferred shares outstanding that pay annual dividends of $16, and the current price of the shares is $104. What is the after-tax cost of new preferred shares for Kresler if the flotation (issuance) costs for preferred are 5 perc..
They will make a 20% down payment, and they must pay 2 points on the loan. Closing costs should be 3% of the purchase price. What is the total dollar amount they will need at closing?
The firm only finances with debt and common equity, so it has no preferred stock on its balance sheet.
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