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Sensitivity analysis James Secretarial Services is considering the purchase of one of two new personal computers, P and Q. Both are expected to provide benefits over a 10-year period, and each has a required investment of $3,000. The firm uses a 10% cost of capital. Management has constructed the following table of estimates of annual cash inflows for pessimistic, most likely, and optimistic results. Computer P Computer Q Initial investment (CF0) $3,000 $3,000 Outcome Annual cash inflows (CF) Pessimistic $ 500 $ 400 Most likely 750 750 Optimistic 1,000 1,200 a. Determine the range of annual cash inflows for each of the two computers. b. Construct a table similar to this for the NPVs associated with each outcome for both computers. c. Find the range of NPVs, and subjectively compare the risks associated with purchasing these computers.
a financial system3939s major economic purpose is to ltbrgta channel savings to more efficient and productive uses
discuss the impact of each of the factors on your opinion. Offer some logic or current reference(s) to support your answer. Which factor do you think will have the biggest impact on interest rates?
RealTurf is considering purchasing an automatic sprinkler system for its sod farm by borrowing the entire $20,000 purchase price. The loan would be repaid with four equal annual payments at an interest rate of 12%/year.
Present a brief side-by-side comparison of MacDonald’s MD&A of 2013 to that of 2012. Were the same business drivers discussed? Were they assigned the same importance by management? Discuss any variations you observed, and the possible reasons for man..
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..
Upon graduating from college, you make an annual salary of $66,356. You set a goal to double it in the future. If your salary increases at an average annual rate of 8.13 percent, how long will it take to reach your goal?
You have been managing a $10 million portfolio that has a beta of 1.4 and a required rate of return of 14%. The current risk free rate is 5.5%. Assume that you will receive another 600,000. If you invest the money in a stock with a beta of 0.75, what..
Lane, Inc., has an issue of preferred stock outstanding that pays a $6.55 dividend every year in perpetuity. If this issue currently sells for $91 per share, what is the required return?
A twenty-year, 5% coupon, $1,000 bond is for sale. It makes annual (once per year) interest payments. (a) What cash flow can I expect if I buy the bond? (b) If its yield to maturity is 7%, what is its price? (c) If its price is $1,080.20, what is its..
An investor has an opportunity to buy a parcel of land for $350,000. He plans to sell it in two years. What will the sale price have to be for the investor to get a 23% constant dollar before-tax ROR with inflation averaging 12% annually?
A company currently has $2.40 per share in free cash flows to equity (FCFE). The FCFE are anticipated to grow at 6% per year. If the investor’s required return is 14%, what is the anticipated value of the firm at the end of 3 years?
Determine the average amount of time that a guest spends checking in. How would this change under each of the stated options? Which option do you recommend?
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