In: Finance
Investment A offers to pay you $10,000 per year for 10 years while Investment B offers to pay you $15,000 per year for 6 years.
a. If the annual interest rate (compounded annually) is 10%, which investment is more valuable?
b. Does your answer change if the annual interest rate (compounded annually) is 5%?
c. At what interest rate are the two investments equally attractive?
In: Finance
X-treme Vitamin Company is considering two investments, both of which cost $14,000. The cash flows are as follows:
| Year | Project A | Project B | ||||
| 1 | $ | 16,000 | $ | 14,000 | ||
| 2 | 6,000 | 5,000 | ||||
| 3 | 4,000 | 9,000 | ||||
a-1. Calculate the payback period for Project A and Project B. (Round your answers to 2 decimal places.)
|
||||||||||
a-2. Which of the two projects should be chosen
based on the payback method?
Project A
Project B
b-1. Calculate the net present value for Project A and Project B. Assume a cost of capital of 8 percent. (Do not round intermediate calculations and round your final answers to 2 decimal places.)
|
b-2. Which of the two projects should be chosen
based on the net present value method?
Project B
Project A
c. Should a firm normally have more confidence in
the payback method or the net present value method?
Payback method
Net present value method
In: Finance
In: Finance
8. Dammon Corp. has the following investment opportunities:
|
Year |
Machine A ($15,000) |
Machine B ($22,500) |
Machine C ($37,5000) |
|
Inflows: |
Inflows: |
Inflows: |
|
|
1 |
$6,000 |
$12,000 |
$0 |
|
2 |
9,000 |
12,000 |
30,000 |
|
3 |
3,000 |
10,500 |
30,000 |
|
4 |
0 |
10,500 |
15,000 |
|
5 |
0 |
0 |
15,000 |
Under the payback period and assuming these machines are
mutually exclusive, which machine(s) would Dammon Corp.
choose?
A. Machine A
B. Machine B
C. Machine C
D. None of the machines will be accepted.
In: Finance
You find the following Treasury bond quotes. To calculate the number of years until maturity, assume that it is currently May 2016. The bonds have a par value of $1,000. Rate Maturity Mo/Yr Bid Asked Chg Ask Yld ?? May 20 103.4729 103.5457 +.3132 6.179 5.674 May 25 104.5069 104.6526 +.4401 ?? 6.208 May 35 ?? ?? +.5522 4.211 In the above table, find the Treasury bond that matures in May 2025. What is your yield to maturity if you buy this bond? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Yield to maturity %
In: Finance
In: Finance
| Item | Prior year | Current year |
| Accounts payable | 8,151.00 | 7,832.00 |
| Accounts receivable | 6,008.00 | 6,768.00 |
| Accruals | 1,043.00 | 1,313.00 |
| Cash | ??? | ??? |
| Common Stock | 11,631.00 | 12,255.00 |
| COGS | 12,658.00 | 18,200.00 |
| Current portion long-term debt | 4,933.00 | 4,962.00 |
| Depreciation expense | 2,500 | 2,767.00 |
| Interest expense | 733 | 417 |
| Inventories | 4,211.00 | 4,801.00 |
| Long-term debt | 13,278.00 | 13,640.00 |
| Net fixed assets | 51,516.00 | 54,654.00 |
| Notes payable | 4,334.00 | 9,975.00 |
| Operating expenses (excl. depr.) | 13,977 | 18,172 |
| Retained earnings | 28,552.00 | 30,991.00 |
| Sales | 35,119 | 47,888.00 |
| Taxes | 2,084 | 2,775 |
What is the firm's dividend payment in the current year?
Answer format: Number: Round to: 0 decimal places.
Item Prior year Current year
Accounts payable 8,178.00 7,755.00
Accounts receivable 6,041.00 6,706.00
Accruals 986.00 1,698.00
Cash ??? ???
Common Stock 11,714.00 11,027.00
COGS 12,725.00 18,230.00
Current portion long-term debt 4,922.00 4,952.00
Depreciation expense 2,500 2,794.00
Interest expense 733 417
Inventories 4,224.00 4,817.00
Long-term debt 14,907.00 13,175.00
Net fixed assets 51,204.00 54,677.00
Notes payable 4,397.00 9,956.00
Operating expenses (excl. depr.) 13,977 18,172
Retained earnings 28,451.00 30,267.00
Sales 35,119 46,835.00
Taxes 2,084 2,775
What is the firm's cash flow from operations?
Submit
Answer format: Number: Round to: 0 decimal places.
In: Finance
Xonics Graphics, Inc., is evaluating a new technology for its reproduction equipment. The
technology will have a three-year life, will cost $1,000, and will have an impact on cash
flows that is subject to risk. Management estimates that there is a fifty-fifty chance that the
technology will either save the company $1,000 in the first year or save it nothing at all. If
nothing at all, savings in the last two years would be zero as well. Even here there is some
possibility that in the second year an additional outlay of $300 would be required to
convert back to the original process, for the new technology may decrease efficiency.
Management attaches a 40 percent probability to this occurrence if the new technology
“bombs out” in the first year. If the technology proves itself in the first year, it is felt that
second-year cash flows will be $1,800, $1,400, and $1,000, with probabilities of 0.20, 0.60,
and 0.20, respectively. In the third year, cash flows are expected to be either $200 greater
or $200 less than the cash flow in period 2, with an equal chance of occurrence. (Again,
these cash flows depend on the cash flow in period 1 being $1,000.)
Book: fundamentals-of-Financial Management_van-horne_wachowicz_13ed
In: Finance
You are trying to value Apple’s stock as of the end of their fiscal year 2018. You’ve calculated their EBITDA from 2016 to 2018 as $61,429, $83,772, and $71,877. You’ve forecast their future EBITDA for the next five years as $81,312, $89,493, $98,496, $108,406, and $119,313. You’ve calculated their unlevered free cash flows from 2016 to 2018 as $44,932, $65,051, and $43,942. You’ve forecast their future unlevered FCFs for the next five years as $45,303, $58,936, $64,865, $71,391, and $78,574. You believe that the FCF in the first year after your forecast horizon will be $82,503, and the FCFs will grow at a constant rate of 5% forever after that time. You’ve calculated the firm’s WACC (discount rate) as 15%. The company currently has $100,000 in capital structure debt, $250,000 in total liabilities, $25,000 in cash, $100,000 in current assets, no minority interest, no employee stock options outstanding, and 3,000 shares outstanding. What is Apple’s implied stock price per share, based on this information? What is their implied price per share if you calculate the terminal value assuming an EBITDA multiple of 7? What is the implied stock price if you value the firm today using an EV/EBITDA multiple of 8? Show your work (you can do this in Excel if you’d like, just include all of your work).
If you could show me the process to this that would be greatly appreciated, Thanks
In: Finance
Discuss the most common and current real-life uses of terminal values in cash flow analysis, and the pros and con's of this calculation process. (Words should be between 400 to 500 with at least 3 paragraphs.
In: Finance
|
You are considering a new product launch. The project will cost $2,000,000, have a four-year life, and have no salvage value; depreciation is straight-line to zero. Sales are projected at 160 units per year; price per unit will be $25,000, variable cost per unit will be $15,500, and fixed costs will be $550,000 per year. The required return on the project is 12 percent, and the relevant tax rate is 32 percent. (Do not round intermediate calculations.) |
| a. |
The unit sales, variable cost, and fixed cost projections given above are probably accurate to within ±10 percent. What are the upper and lower bounds for these projections? What is the base-case NPV? What are the best-case and worst-case scenarios? (Negative amount should be indicated by a minus sign. Round your NPV answers to 2 decimal places. (e.g., 32.16)) |
| Scenario | Upper bound | Lower bound | |
| Unit sales | units | ||
| Variable cost per unit | $ | $ | |
| Fixed costs | $ | $ | |
| Scenario | NPV |
| Best-Base | $ |
| Best-case | $ |
| Worst-case | $ |
| b. |
Calculate the sensitivity of your base-case NPV to changes in fixed costs. (Negative amount should be indicated by a minus sign. Round your answer to 3 decimal places. (e.g., 32.161)) |
| ΔNPV/ΔFC | $ |
| c. |
What is the accounting break-even level of output for this project? (Round your answer to nearest whole number. (e.g., 32)) |
| Accounting break-even | units |
In: Finance
|
Your company is deciding whether to invest in a new machine. The new machine will increase cash flow by $322,000 per year. You believe the technology used in the machine has a 10-year life; in other words, no matter when you purchase the machine, it will be obsolete 10 years from today. The machine is currently priced at $1,720,000. The cost of the machine will decline by $105,000 per year until it reaches $1,195,000, where it will remain. (Do not round intermediate calculations.) |
|
If your required return is 13 percent, calculate the NPV today. (Round your answer to 2 decimal places. (e.g., 32.16)) |
| NPV | $ |
|
If your required return is 13 percent, calculate the NPV if you wait to purchase the machine until the indicated year. (Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places. (e.g., 32.16)) |
| NPV | |
| Year 1 | $ |
| Year 2 | $ |
| Year 3 | $ |
| Year 4 | $ |
| Year 5 | $ |
| Year 6 | $ |
| Should you purchase the machine? |
|
| If so, when should you purchase it? |
|
In: Finance
Compute the expected return and risk on your portfolio using the
following information: you invest 20%, 40%, and 40% in assets A, B,
and C, respectively: Expected returns on assets A, B, and C: 10%,
5%, and 2%, respectively. Standard deviations of A, B, and C are
10%, 6%, and 1%, respectively. The Covariances between the assets
are all zero but the covariance between B and C which is
1.
In: Finance
|
We are evaluating a project that costs $520,000, has a six-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 73,000 units per year. Price per unit is $45, variable cost per unit is $30, and fixed costs are $840,000 per year. The tax rate is 35 percent, and we require a 10 percent return on this project. |
| a. |
Calculate the accounting break-even point. (Do not round intermediate calculations and round your final answer to nearest whole number. (e.g., 32)) |
| Break-even point | units |
| b-1 |
Calculate the base-case cash flow and NPV. (Do not round intermediate calculations and round your NPV answers to 2 decimal places. (e.g., 32.16)) |
| Cash flow | $ | |
| NPV | $ | |
| b-2 |
What is the sensitivity of NPV to changes in the sales figure? (Do not round intermediate calculations and round your final answer to 3 decimal places. (e.g., 32.161)) |
| ΔNPV/ΔQ | $ |
| c. |
What is the sensitivity of OCF to changes in the variable cost figure? (Do not round intermediate calculations and Negative amount should be indicated by a minus sign.) |
| ΔOCF/ΔVC | $ |
In: Finance