The investment will be sold for salvage

Assignment Help Financial Management
Reference no: EM131552287

An investment being considered by ETBucs Company requires an initial outlay of $1 million at time 0 and an additional outlay of $500,000 at the end of five years. The investment will provide returns of $200,000 a year for the first five years and $300,000 a year for the second five years. These cash flows will be received at midyear. At the end of ten years, the investment will be sold for salvage of $250,000. What is the NPV at a 10% cost of capital?

Reference no: EM131552287

Questions Cloud

Concept of the time value of money : Which one of the following describes the concept of the Time Value of Money (TVM) most appropriately?
Describes it normal market premium or normal risk premium : Which one of the following describes it (Normal Market Premium or Normal Risk Premium) most appropriately?
The company market value to increase : In which occasion, can you expect the company’s market value to increase?
Define technical writing in your own words : Define technical writing in your own words. How would you explain technical writing to someone unfamiliar with it?
The investment will be sold for salvage : At the end of ten years, the investment will be sold for salvage of $250,000. What is the NPV at a 10% cost of capital?
What is the amount of annual payment for this debt according : What is the amount of annual payment for this debt according to the given information?
What is the amount of the interest included in your payment : If you make the payment of $400,000 at the end of the first year, what is the amount of the interest included in your payment?
What is the real interest rate : If your company’s Tax Rate is 40%, what is the Real Interest Rate (=After-tax interest Rate)?
Company has to maintain to satisfy the entire investors : What is the overall growth rate this company has to maintain to satisfy the entire investors (creditors & shareholders)?

Reviews

Write a Review

Financial Management Questions & Answers

  Sensitivity analysis in evaluating project risk

For the given cash flows below, assume the cash flow is the same in the next 2 years. Compute the NPV for each project, and compute the incremental IRR. Compare and explain why NPV always gives the correct decision. Compare and contrast the uses of b..

  Bonds is the most liquid

Which of the following bonds is the most liquid?

  Appropriate for hedging inflow of foreign currency

Company knows that it is due to receive certain amount of foreign currency in four months. What position is appropriate for hedging inflow of foreign currency?

  The financial services modernization act

The Financial Services Modernization Act of 1999 (Gramm-Leach-Bliley Act) basically repealed the Glass-Steagall Act of 1933. Do you believe the passage of this Act was beneficial for the banking industry, or will it be a detriment to the industry in ..

  Compute the price of a derivative whose payoff

The current spot price of a stock is $21, the expected rate of return of the stock is 11%, and the volatility is 12%. The risk-free rate is 5%. Compute the price of a derivative whose payoff in 5 months is ln(S5/12) + 32, where S5/12 is the stock pri..

  Total of long-term debt plus equity capital

Albrecht Inc. is a no-growth firm whose sales fluctuate seasonally, causing total assets to vary from $310,000 to $410,000, but fixed assets remain constant at $260,000. If the firm follows a maturity matching (or moderate) working capital financing ..

  What is role of expectations in interest rate determination

The Adjustment for Risk & Volatility is designed to cover expected losses and provide higher risk-adjusted returns for each loan grade. What is the role of expectations in interest rate determination? How do expectations affect real and nominal inter..

  Compute the relative risk of the two firms

Compute the degree of operating, financial, and the total leverage for firm R. Compute the relative risk of the two firms.

  Costs to financial distress-no operating effects to leverage

Calculate the value of leverage for Cruise Company and Kidman Company, whose economic balance sheets are shown. Assume the marginal corporate tax rate is 35%, the marginal tax rate on personal income derived from equity is 20%, and the marginal tax r..

  What is the effective tax rate on the intercompany dividends

A parent holding company sells shares in its subsidiary such that the parent now owns only 65% of the subsidiary and, thus, the tax returns of the parent and its subsidiary can't be consolidated. The parent receives annual dividends from the subsidia..

  What was his annualized rate of return on this investment

Scott purchased 200 shares of Frozen Foods stock for $48 a share. Four months later, he received a dividend of $0.22 a share and also sold the shares for $42 each. What was his annualized rate of return on this investment?

  Percentage of the total payments made during first five year

Halfway through the loan's life, what is loan's remaining balance? What percentage of total payments made during first five years will be made toward interest

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd