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Romboski, LLC, has identified the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 −$ 57,000 −$ 57,000 1 33,000 20,300 2 27,000 24,300 3 19,500 29,000 4 13,400 25,300 Requirement 1: (a) What is the IRR for each of these projects? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).) Internal rate of return Project A % Project B % (b) If you apply the IRR decision rule, which project should the company accept? Requirement 2: (a) Assume the required return is 13 percent. What is the NPV for each of these projects? (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).) Net present value Project A $ Project B $ (b) Which project will you choose if you apply the NPV decision rule? Requirement 3: (a) Over what range of discount rates would you choose Project A? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) Project A @ % (b) Over what range of discount rates would you choose Project B? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) Project B @ % (c) At what discount rate would you be indifferent between these two projects? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).) Discount rate %
In 2014, stock ABC pays $0.80 per share quarterly dividend and the dividend was $0.50 per share in 2008. The growth rate is 5.0%. Find the beta for stock ABC. Find the current interest rate on a 6-month treasury bill.
This assessment has two parts both addressing the subject of Time Value Money (TVM). Both parts should be submitted in the same paper. The main TVM problems relating to healthcare are: a) present value of a lump sum b) present value of an annuity str..
A stock price is currently $100. Over each of the next two six-month periods it is expected to go up by 10% or down by 9%. The risk-free interest rate is 5%. What is the risk-neutral probability?
Investors and creditors are typically not interested in the same thing. Investors are typically interested in whether a company is going to turn a profit over time, while a creditor is interested in short-term cash flow. Decide whether you are an inv..
You hold a portfolio consisting of a $5,000 investment in each of 20 different stocks. The portfolio beta is equal to 0.87. You have decided to sell a coal mining stock (b = 1.00) at $5,000 net and use the proceeds to buy a like amount of a mineral r..
Joe secured a loan of $10,000 four years ago from a bank for use toward his college expenses. The bank charges interest at the rate of 3%/year compounded monthly on his loan. Now that he has graduated from college, Joe wishes to repay the loan by amo..
Construct a yield curve based on these reported yields, putting term-to-maturity on the horizontal (x) axis and yield-to-maturity on the vertical (y) axis.
Max starts making deposits into a fund continuously at a rate of (19-2t). He will be making deposits until time t=7. This fund credits a force of interest of 2.1%. Calculate the present value of this fund two ways: one method should use an Increasing..
The city of Carlsbad in California is considering building a $300 million water-desalination plant. The facility would be the largest in the Western Hemisphere, producing 50 million gallons of drinking water a day - enough to supply about 100,000 hom..
Explain how the following risks may affect these 3 sources of financing in international capital markets. In addition, explain how these risks may influence a company's international weighted average cost of capital (WACC):
Accounting statements can be manipulated. Please try to give an argument pro and con on this ethical issue. Any actual public examples you would like to cite would be most appreciated by all.
Eccles Inc., a zero growth firm, has an expected EBIT of $120,000 and a corporate tax rate of 35%. Eccles uses $500,000 of 12% debt, and the cost of equity to an unlevered firm in the same risk class is 16%.
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