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Plummer Chemicals employs the internal rate of return method to evaluate capital expenditure proposals. Plummer adjusts its acceptable rate of return to accommodate varying degrees of risk. The cash flow characteristics of a capital proposal required rate of return are presented below: Coefficient of Variation of Cash Flow .10 to .15 Required Rate of Return .12Coefficient of Variation of Cash Flow .16 to .35 Required Rate of Return .14Coefficient of Variation of Cash Flow .36 to .50 Required Rate of Return .18Coefficient of Variation of Cash Flow >.50 Required Rate of Return .24 Expected Cash Flows Each Year from Proposal for 10 years $400,000 Probability .20Expected Cash Flows Each Year from Proposal for 10 years $600,000 Probability .40Expected Cash Flows Each Year from Proposal for 10 years $800,000 Probability .30Expected Cash Flows Each Year from Proposal for 10 years $900,000 Probability .10 The Capital expenditures proposal will require a cash investment of $3,000,000. Utilizing the internal rate of return method and the information above, should Plummer accept the proposal? Why?
Throughout 2007, Gorilla Corporation has net short-term capital gains of $90,000, net long term capital losses of $570,000, and taxable income from other sources of $1.5 million. Prior years' transactions included the following:
Assume instead of paying the cash dividend, the firm used the $2.4 million of excess funds to purchase shares at slightly over the current market value of $64 at a price of $65.20. How many shares could be repurchased?
Calculating discounted payback. An investment project has annual cash inflows of $6,500, $7,000, $7,500, and $8,000, and a discount rate of 14%.
Discuss and explain valuation, and describe why it is important for the financial manager to understand the valuation process?
Finding Cost of Equity by using CAPM and NPV of the project with that rate - The parent's discount rate for Argentina is 9%. How should the project be financed? Justify your answer numerically.
As the bank is also doing lot of record keeping, firm’s administrative cost would reduce by $2,000 per month. What suggestion would you provide firm with respect to proposed cash management suppose the firm’s opportunity cost is 12%?
How should a "gain" from the sale of treasury stock be reflected when applying the cost method of recording treasury stock transactions?
Describe in general terms how each option could change a project's NPV and show the corresponding risk of each option, relative to what would have been estimated if the option had not been considered.
To complete your Individual Assignment, do the following: Please answer the Individual Assignment in a single Word document ------------------------ Individual Assignment 1E: Final Project A recurring theme of this module has been the value of data t..
Evaluate the realized rate of return for investors who purchased the bonds when they were issued and who surrender them today in exchange for the call price.
A call provision on a bond allows the issuer to redeem the bond at will. Investors do not like call provisions and so require higher interest on callable bonds.
Computation of value of perpetuity and annuity and which alternative should you choose ignoring tax consequences
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