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Your firm has an average receipt size of $130. A bank has approached you concerning a lockbox service that will decrease your total collection time by two days. You typically receive 7,200 checks per day. The daily interest rate is .018 percent. The bank charges a lockbox fee of $185 per day.
What is the NPV of accepting the lockbox agreement? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
NPV $
What would the net annual savings be if the service were adopted? (Use 365 days a year. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Net annual savings $
A firm is expected to pay a dividend of $2.45 next year and $2.60 the following year. Financial analysts believe the stock will be at their price target of $95 in two years. Compute the value of this stock with a required return of 12.4 percent.
Face value =$1,000, coupon rate = .06, maturity = 11 yrs, market yield = 0.074, duration = 8.0 yrs. Suppose that immediately after you purchase the bond, all interest rates decline from .074 to .064 and remain at .064 thereafter (remember that bond y..
The rates given here include the risk-free rate, rRF, and appropriate risk premiums. Today a three-year bond that is, a bond that matures on December 31, 2014- has an interest rate equal to 6 percent. What is the yield to maturity for bonds that matu..
Several years ago, Castles in the Sand, Inc., issued bonds at face value at a yield to maturity of 5.8%. Now, with 5 years left until the maturity of the bonds, the company has run into hard times and the yield to maturity on the bonds has increased ..
Scanlin, Inc., is considering a project that will result in initial aftertax cash savings of $1.76 million at the end of the first year, and these savings will grow at a rate of 3 percent per year indefinitely. What is the maximum initial cost the co..
ABC Company considers Projects A and B, whose cash flows and the required rate of return (WACC) are shown below. These projects are mutually exclusive and equally risky. The CEO wants to use the IRR criterion, while the CFO recommends the NPV method...
We want to retire in 40 years, and we shall need $45,000 income per annum during our retirements which will last 35 years. We can save $20,000 annually during the first 9 years. We would like to know what the pension fund should be to finance our ret..
A European call option and a European put option on a stock both have a strike price of $45 and expire in 6 months. Currently, the call price is $10 and the put price is $5 in the market. The risk-free rate is 2% per annum, and the current stock pric..
Both bond A and bond B have 6.6 percent coupons and are priced at par value. Bond A has 8 years to maturity, while bond B has 15 years to maturity. If interest rates suddenly rise by 1.2 percent, what is the percentage change in price of bond A and b..
A firms balance sheet has the following entries: what will be each of these blance sheet entries after:
A company believes it can sell 5,000,000 of its proposed new optical mouse at a price of $10.50 each. There will be $8,000,000 in fixed costs associated with the mouse. If the company desires to make a profit $2,000,000 on the mouse, what is the targ..
Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.9 million. The fixed asset will be depreciated straight-line to zero over its 3 year tax life, after which time it will be worthl..
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