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Lewis Finance Investor Group, Inc. is considering a new project, which would include opening a college textbook store approximately 2 miles north of campus on Rt. 53. The initial investment (outflow) will include inventory, land and a building. The project will be over in 4 years, at which time a textbook retailer is likely to purchase the business. The WACC is expected to be 10%. The following summarizes expected cash inflows:
What is the project’s NPV? Why or why not should the project be accepted?
What is the project’s IRR? Why or why not should the project be accepted?
Compute the project’s MIRR. Why or why not should this project be accepted?
A $20,000 4% loan is to be repaid in n level annual instalments, commencing one year after the date of the loan. The amount of principal included in the 4th instalment is $450. In which of the following rangers is the amount of the instalment?
You have a choice of borrowing money from a finance company at 19 percent compounded dailty or borrowing money from a bank at 21 percent compounded semiannually. Which alternative is the most attractive? If you can borrow funds from a finance company..
Western Enterprises’ bonds have 10 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon rate is 9 percent. The bonds have a yield to maturity of 7 percent. What is the current market price of these..
Suppose you are committed to owning a $197,000 Ferrari. If you believe your mutual fund can achieve a 11 percent annual rate of return and you want to buy the car in 8 years on the day you turn 30, how much must you invest today?
Simpkins Corporation is expanding rapidly, and it does not pay any dividends because it currently needs to retain all of its earnings. However, investors expect Simpkins to begin paying dividends, with the first dividend of $1.00 coming 3 years from ..
a 16 debenture of r5 000 is redeemable at a premium of 10 after 5 years. the fair rate of return on similar debentures
An investor purchases an asset on October 26 2011 for $50,000, and sells it for $85,000 the next year. The asset generated cash flows of $10,000 over this period. What is the portfolio standard deviation? What is the expected (use arithmetic average)..
You are evaluating a proposed expansion of an existing subsidiary located in Switzerland. The cost of the expansion would be SF 21 million. The cash flows from the project would be SF 5.9 million per year for the next five years. The dollar required ..
Fleet skills test can be accomplished on a driving range or in actual traffic conditions. Give at least one advantage and one disadvantage of each testing environment.
Is anyone familiar with the "Iridium"/(Motorola) case study? Why did Motorola finance Iridium with project debt instead of corporate debt?
Lever Age pays a(n) 9% rate of interest on $11.0 million of outstanding debt with face value $11.0 million. The firm’s EBIT was $2.0 million. If the firm must retire $400,000 of debt for the sinking fund each year, what is its “fixed-payment cash-cov..
Stephen plans to purchase a car 5 years from now. The car will cost $55,339 at that time. Assume that Stephen can earn 5.16 percent (compounded monthly) on his money. How much should he set aside today for the purchase?
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