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A new product has two major potential markets. The product will succeed in both or fail in both, with equal probability. The markets are otherwise independent. You may enter the markets sequentially or simultaneously either now, one year from now, or two years from now. Later entry is not feasible. Market A requires an initial investment of $100 regardless of when it is entered. If the product is successful, market A will have a present value of $150 one year after entry. If the product fails Market A will be worth $90 one year after entry. Market B requires an initial investment of $55 regardless of when it is entered. One year after entry, B will have a present value of $130 or $20 for success and failure, respectively. For simplicity, perform all discounting in the problem at 5%.
c. Can you state a general capital budgeting rule for selecting the optical strategy in this and similar problems?
d. Suppose there are three potential markets, A, B, C, where A and B are as above and C requres an investment of $30 regardless of when entered, and promises a return of $50 or $30 one year later. Does the decision rule you formulated in part (c.) above produce the optimal decision for this revised problem? Why or why not?
You take out a 4 year car loan for $18,000. The loan has a 4% annual interest rate. The payments are made monthly. What are the monthly payments?
A bank has invested in U.S. Treasury investments that mature in two years. They will be held until maturity. The investments are funded with three-year maturity time deposits. The primary risk this bank faces is
question 1.what benefits are gained from research planning and the analysis of financial statements? include sources
All else constant, the weighted average cost of capital for a risky, levered firm will decrease if:
developing a balanced scorecard explore the need for organisations to calculate and manage performance against
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On average, a coupon bond will increase in value as it approaches maturity. A bond with a coupon rate higher than its yield is worth more than its par value. Real interest rates are generally higher than nominal interest rates.
Suppose your company has a building worth $380 million. Because it is located in a high-risk area for natural disasters, the probability of a total loss in any particular year is 1.2 percent. What is your company’s expected loss per year on this buil..
You are evaluating two different silicon wafer milling machines. The Techron I costs $228,000, has a three-year life, and has pre-tax operating costs of $59,000 per year. The Techron II costs $400,000, has a five-year life, and has pre-tax operating ..
Suppose that a person won the Florida lottery and was offered a choice of two prizes: (1) $500,000 or (2) a coin-toss gamble in which he or she would get $1 million if a head were flipped and zero if a tail. What is the expected dollar return on the ..
Pat sells real estate for $30,000 cash and $120,000 5-year note. If her basis in the property is $90,000 and she receives only the $30,000 down payment in the year of the sale, how much is Pat's taxable gain in the year of sale using the instalment s..
Suppose sales for the entire year were 100,000 and the COGS were 80% of sales. The inventory conversion period is 40 days. The accounts payable deferral period is 15 days, and the cash conversion cycle is 30 days. What is the accounts receivable bala..
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