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Part 1: These are the forecasts of revenues over the lifetime of a project. Assume all cash flows occur at the end of the year. Yearly expenses from year 1 to year 3: $30 Million Yearly revenues from year 1 to year 3: $0 Yearly expenses from year 4 to year 10: $55 Million Yearly expected revenues from year 4 to year 10: $105 Million The discount rate for the firm is 8.1% for all cash flows (net cash flows from projects, recovered NWC, salvage, etc.). In the first part of this question, you are asked to only calculate the present value of the discounted costs and revenues. What is this value? Part 2 is an annuity of $50 Million a year for 7 years, the first cash flow which will occur at the end of the 4th year, and the last one which will occur at the end of the 10th year. Now position yourself at the end of year 3. You should be able to use the annuity formula for the 7 cash flows which will occur from the end of year 4 to the end of year 10. However, you will have the value at the end of year 3 by using the annuity formula. You will have to use discounting again to find the present value, that is today. Once you have calculated the above, answer would be Part 1- Part 2= Discounted Net Cash Flows from year 4 to year 10- discounted costs from year 1 to year 3.
Part 2: A study that looked at the viability of the project has already been completed at a cost of $3 million. Initial Investment of $70 million for the plant and $11 million net working capital. The discount rate for the firm is 8.5 for all cash flows. Assume that both expenses and revenues for a year occur at the end of the year. NWC pays the bills during the year but has to be replenished at the end of the year. At the end of the 10th year, the plant will be scrapped for a salvage value of $20 million and the NWC equal to $11 will also be recovered. What is the NPV of the project?
Calculate the bond equivalent yield and effective annual return on a jumbo CD that is 115 days from maturity and has a quoted nominal yield of 6.62 percent.
Jack purchased a new home for $75,000. He paid $20,000 down and agreed to pay the rest in 20 equal annual payments, which include the principal payment plus 9% compound interest; payments are made at the end of the year. What will the payments be?
Develop a BSC that is aligned to the key goal in the strategic plan, i.e. exceeding revenue of $25 million dollars by 2015.
The current price of Yusof Corporation stock is RM26.50 per share. Earnings next year should be RM2 per share and it should pay a RM1 dividend. The P/E multiple is 15 times on average. What price would you expect for Yusof Corporation’s stock in the ..
Write the footnote for Danerys' year-end financial statements (assume 12/31/13 year-end) related to goodwill and other intangible assets - Determine the appropriate acquisition-date journal entry for the acquisition.
Which of the following is the appropriate way to calculate the price of a share of a given company using the free cash flow valuation model?
The market and Stock J have the following probability distributions: Calculate the expected rates of return for the market and Stock J. Calculate the standard deviations for the market and Stock J. As an equity analyst you are concerned with what wi..
Project A has an initial cost of $80,000 and provides cash inflows of $34,000 a year for three years. Project B has an initial cost of $80,000 and produces a cash inflow of $114,000 in year three. The projects are martially exclusive. Which project(s..
Maggie's Muffins, Inc., generated $2,000,000 in sales during 2013, and its year-end total assets were $1,600,000. Also, at year-end 2013, current liabilities were $1,000,000, consisting of $300,000 of notes payable, $500,000 of accounts payable, and ..
What is the future likely to hold for International Airlines Group? Continued growth and financial success and if so why and how? Are the strategies currently being pursued likely to be successful ? If so why?
Suppose you receive 2,500,000 British Pounds (not Euros) today and plan to convert into US dollars early next February. Which is the correct action to take today in order to hedge against GBP exchange rate risk?
George Jefferson established a trust fund that provides $171,500 in scholarships each year for worthy students. The trust fund earns a 2 percent rate of return. How much money did Mr. Jefferson contribute to the fund assuming that only the interest i..
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