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We are examining a new project. We expect to sell 6,500 units per year at $59 net cash flow apiece for the next 10 years. In other words, the annual operating cash flow is projected to be $59 × 6,500 = $383,500. The relevant discount rate is 13 percent, and the initial investment required is $1,760,000. After the first year, the project can be dismantled and sold for $1,630,000. Suppose you think it is likely that expected sales will be revised upward to 9,500 units if the first year is a success and revised downward to 5,100 units if the first year is not a success. a. If success and failure are equally likely, what is the NPV of the project? Consider the possibility of abandonment in answering. (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) b. What is the value of the option to abandon?
What was the 2008 operating income and net income? What was operating return on assets and return on equity? Assume that interest must be paid on all of the debt.
Discuss and explain three strategies for testing internal controls when information technology is used for significant accounting processing.
The dividend per share in one year is $2. In year two it is $4 a share. Then the dividend will grow at 5 percent per year after that. The expected rate of return is 12 percent.
In addition, the company has a second debt issue on the market, a zero coupon bond with 9 years left to maturity; the book value of this issue is $69 million, the face value (also called par value) is $84 million, and the bonds sell for 76 percent..
Mudvayne, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 18 years to maturity that is quoted at 106 percent of face value. The issue makes semiannual payments and has an embedded cost of 5 percent annuall..
Consider a constant payment mortgage of $100,000, maturity thirty years, interest rate 6 percent, monthly payments.
Illustrate the functions and roles played by financial markets and institutions, particularly as they relate to the flow of funds from lenders to borrowers within the global financial system
Assume net income for the coming year is p redicted to be $1,634 and dividends are forecasted to be $657. After careful analysis, you determine asset needs for next year are $48,824 and liabilities are expected to be $12,869.
AMC Corporation currently has an enterprise value of $350 million and $110 million in excess cash. The firm has 10 million shares outstanding and no debt. Suppose AMC uses its excess cash to repurchase shares. After the share repurchase, news will..
Computation of present value of cash flows and What is the present value of this cash stream
If the Treasury and corporate bonds have a par value of $1,000 and the municipal bond has a par value of $5,000, what is the price of these three bonds in dollars?
while the probability of a normal economy is 55% and the chance of a recession is 25%. What is the expected rate of return on this stock?
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