The Pan American Bottling Co. is considering the purchase of a new machine that would increase the speed of bottling and save money. The net cost of this machine is $72,000. The annual cash flows have the following projections. Use Appendix B and Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods. Year Cash Flow 1 $ 29,000 2 33,000 3 35,000 4 21,000 5 18,000 a. If the cost of capital is 12 percent, what is the net present value of selecting a new machine? (Do not round intermediate calculations and round your final answer to 2 decimal places.) Net present value $ b. What is the internal rate of return? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Internal rate of return % c. Should the project be accepted? Yes No

Cash budget to determine key methods : From the scenario, analyze TFC’s cash budget to determine key methods in which the budget may be optimized (e.g., by renegotiating terms and conditions on some of its payables, etc.). If you believe that there is room for improvement, recommend key s.. |

Using net present value analysis : Dixie Dynamite Company is evaluating two methods of blowing up old buildings for commercial purposes over the next five years. Method one (implosion) is relatively low in risk for this business and will carry a 11 percent discount rate. Method two (e.. |

Capital asset pricing model-dividend valuation model : Eaton Electronic Company’s treasurer uses both the capital asset pricing model and the dividend valuation model to compute the cost of common equity (also referred to as the required rate of return for common equity). Assume: Rf = 6 % Km = 9 % β = 1... |

The fair present value of the treasury security : Explain what a STRIP is. The total sale proceeds from selling the stepped components of a Treasury security can sometimes be greater than the fair present value of the Treasury security. Why might this happen? |

Would increase the speed of bottling and save money : The Pan American Bottling Co. is considering the purchase of a new machine that would increase the speed of bottling and save money. The net cost of this machine is $72,000. The annual cash flows have the following projections. Use Appendix B and App.. |

Calculate the weighted cost of each source of capital : Northwest Utility Company faces increasing needs for capital. Fortunately, it has an Aa3 credit rating. The corporate tax rate is 30 percent. Northwest’s treasurer is trying to determine the corporation’s current weighted average cost of capital in o.. |

Is a warrant more similar to a call option or a put option : Company Z issued bonds with detachable warrants several years ago. Each warrant allows the holder to purchase one share of stock at $30 per share. The stock has a beta of 1.3. Calculate the exercise value of the warrants if the price of the und.. |

Estimates that net cash flows for the acquired company : Company X wants to acquire another similar company. It estimates that net cash flows for the acquired company will be $8,500,000 per year for 10 years. The cost is $50,000,000. The company's cost of capital is 10 percent. Should the company go ahead .. |

Commercial banks alleviate the problem of liquidity risk : How do commercial banks alleviate the problem of liquidity risk that investors would face if they were to directly loan funds to individuals and corporations? |

## What is its economic value addedVictoria Adeleye Co. has the following data for the year ending 12/31/10: Net income = $600; Net operating profit after taxes (NOPAT) = $700; Total assets = $2,500; Short-term investments = $200; Stockholders' equity = $1,800; Total debt = $700; and .. |

## How can they be used to manage foreign exchange riskAssume you have just been hired as a financial analyst by Tennessee Sunshine Inc., a mid-sized Tennessee company that specializes in creating exotic sauces from imported fruits and vegetables. Why might stockholders be indifferent to whether or not a.. |

## Use trial and error to find the unknown rate of returnStorico Co. just paid a dividend of $1.30 per share. The company will increase its dividend by 20 percent next year and will then reduce its dividend growth rate by 5 percentage points per year until it reaches the industry average of 5 percent divid.. |

## Effective annual risk-free rate of interestA put option on a stock with a current price of $48 has an exercise price of $50. The price of the corresponding call option is $4.50. According to put-call parity, if the effective annual risk-free rate of interest is 6% and there are four months un.. |

## Evaluate various capital investment alternativesExplain CVP analysis in detail with suitable example. Evaluate various capital investment alternatives. Describe the planning-and-control cycle and the five key dimensions of budgeting. Calculate costs using activity-based costing method with suitabl.. |

## Does your current or previous workplace have a formalDoes your current or previous workplace have a formal, established road map for the organization's future? Does your employer have a vision of where it wants to go? If not, why not—what are the barriers to developing a vision? If not, how could it be.. |

## Yield to maturity and future priceA bond has a $1,000 par value, 7 years to maturity, and a 9% annual coupon and sells for $1,095. What is its yield to maturity (YTM)? |

## What is current yield on this bond and yield to maturityStephan and Chris have decided to acquire CellU in order to expand TechU’s product line. They are trying to decide how to finance the acquisition, and are currently looking at financing it by issuing bonds. TechU just issued an 18-year, 12 percent co.. |

## What is harveys maximum moving expense deductionHarvey graduated college and accepted his first real job in july of 2014. His new employer gave him $500 to help cover the cost of the trip. He drove 1,250 miles. He used a rented trailer to move his personal goods. He paid $350 for meals and $200 fo.. |

## Holding other variables constant-decrease in dividend growthHolding other variables constant, a decrease in the dividend growth rate would a) increase stock price, b) decrease stock price, c) have no effect on stock price, d)more information is needed to answer the question. |

## Indifferent between these two projectsGarage, Inc., has identified the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 –$ 28,000 –$ 28,000 1 13,400 3,800 2 11,300 9,300 3 8,700 14,200 4 4,600 15,800 a-1 What is the IRR for each of these projects? At what dis.. |

## Explanation on how risk plays role within financial marketsAn explanation on how risk plays a role within financial markets and how did Bernard Madoff change the way in which individuals viewed the stock market and their investing plans. |

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