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Archer Daniels Midland Company is considering buying a new farm that it plans to operate for 10 years. The farm will require an initial investment of $11.80 million. This investment will consist of $2.70 million for land and $9.10 million for trucks and other equipment. The land, all trucks, and all other equipment is expected to be sold at the end of 10 years at a price of $5.12 million, $2.32 million above book value. The farm is expected to produce revenue of $2.09 million each year, and annual cash flow from operations equals $1.91 million. The marginal tax rate is 35 percent, and the appropriate discount rate is 10 percent. Calculate the NPV of this investment. (Round intermediate calculations and final answer to 2 decimal places, e.g. 15.25.)
You bought 100 Google Shares for $400. You also bought 1 put option on Google with a strike of $395 for $20. What is the maximum loss on your position? What is the profit on your position when the stock hits $440?
Stan elects to receive his retirement benefit over 10 years at the rate of 2000 per month beginning one month from now. The monthly benefit increases by 5% each year. At an annual nominal interest rate of 6% compounded monthly, calculate the present ..
You want to buy a car, and a local bank will lend you $20,000. The loan would be fully amortized over 5 years (60 months), and the nominal interest rate would be 12%, with interest paid monthly. What is the monthly loan payment? What is the loan’s EF..
"Which one of the following statements is correct? The internal rate of return is the most reliable method of analysis for any type of investment decision. The payback method is biased toward short-term projects.
What is the firm's cost of equity? If the following is true:
Consider the following information form September 15th, 2012 for a coupon bond with face valueof $1000 and maturity on September 15th, 2014: What was the bond current yield? Why is the bond's yield to maturity greater than its coupon rate?
You are considering a job offer. The job offers an annual salary of $52,000, $55,000, and $60,000 a year for the next three years, respectively. The offer also includes a starting bonus of $2,000 payable immediately. What is this offer worth to you t..
Given the following probability distribution describing your expectations concerning the return on this stock, compute your expected return?
The law now gives a worker who becomes unemployed the right to buy continuing health insurance coverage after leaving the company. Why might it be rational for a factory worker who loses his or her job to give up this legal right to purchase coverage..
In looking for investment information concerning the bakers company common stock, you have read in one source that its beta coefficient for the last 3 years is 1.1 while in another source the beta coefficient is 1.4 for the last 5 years. Explain in d..
Assume that the average firm in your company’s industry is expected to grow at a constant rate of 6% and that its dividend yield is 7%. Your company is about as risky as the average firm in the industry, what is the estimated value per share of your ..
The need for elimination of intercompany sales of inventory is made clear in the week's lesson as not to overstate sales and cost of goods sold as well as inventory. What impact, if any, does the choice of inventory valuation method (LIFO, FIFO, aver..
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