Problem 8-15 Comparing Investment Criteria [LO 1, 3, 4, 6]

Consider the following two mutually exclusive projects:

The required return on these investments is 13 percent.

Required: (a) What is the payback period for each project? (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).) Payback period Project A 3.44 years Project B 2.16 years

(b) What is the NPV for each project? (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).) Net present value Project A $ Project B $

(c) What is the IRR for each project? (Do not round intermediate calculations. Enter your answers as a percentage rounded to 2 decimal places (e.g., 32.16).) Internal rate of return Project A % Project B %

(d) What is the profitability index for each project? (Do not round intermediate calculations. Round your answers to 3 decimal places (e.g., 32.161).)

Con-Agra is one of the world’s largest packaged foods companies. Take a look at it (google it): CAG (NYSE). What does the beta tell you about Con-Agra?

What is beta, how is it calculated, why is it relevant (or where it is not)? How relevant do you feel it is with respect to Con-Agra? What does it tell you about Con-Agra? Would your answer be different if the question was not about Con-Agra but instead, was about Lyft (LYFT) (NASDAQ)? What kinds of risks are there with respect to Con-Agra (in terms of systematic and non-systematic risk)? What kinds of risks are there with respect to Lyft (in term of systematic and non-systematic risk) that makes it different from Con-Agra? With that in mind, do you think the beta is a good reflection or not to invest in Con-Agra or Lyft? You can address this in the context of the Efficient Market Hypothesis if you want. Anything else worry you (or not) about Con-Agra or Lyft? (Finance related factors)

How has technology changed the way target cash balances are set.

what is the potential for inflation in the US economy, considering the Fed's accommodative policies during the Great Recession?

Problem 4-17
Present Value for Various Compounding Periods

Find the present value of $475 due in the future under each of the following conditions. Do not round intermediate calculations. Round your answers to the nearest cent.

1. 12% nominal rate, semiannual compounding, discounted back 5 years
   $  
   
2. 12% nominal rate, quarterly compounding, discounted back 5 years
   $  
   
3. 12% nominal rate, monthly compounding, discounted back 1 year
   $  

Consider the following 6 months of returns for 2 stocks and a portfolio of those 2​ stocks:

The portfolio is composed of​ 50% of Stock A and​ 50% of Stock B.  

a. What is the expected return and standard deviation of returns for each of the two​ stocks?

b. What is the expected return and standard deviation of returns for the​ portfolio?

c. Is the portfolio more or less risky than the two​ stocks? Why?

a. What is the expected return and standard deviation of returns for each of the two​ stocks?

The expected return of Stock A is___?  (Round to one decimal​ place.)

Future Value of an Annuity

Find the future value of the following annuities. The first payment in these annuities is made at the end of Year 1, so they are ordinary annuities. Round your answers to the nearest cent. (Notes: If you are using a financial calculator, you can enter the known values and then press the appropriate key to find the unknown variable. Then, without clearing the TVM register, you can "override" the variable that changes by simply entering a new value for it and then pressing the key for the unknown variable to obtain the second answer. This procedure can be used in many situations, to see how changes in input variables affect the output variable. Also, note that you can leave values in the TVM register, switch to Begin Mode, press FV, and find the FV of the annuity due.)

1. $600 per year for 10 years at 10%.
   $_____?   
   
2. $300 per year for 5 years at 5%.
   $_____?   
   
3. $600 per year for 5 years at 0%.
   $_____?

Now rework parts a, b, and c assuming that payments are made at the beginning of each year; that is, they are annuities due.

4. $600 per year for 10 years at 10%.
   $_____?   
   
5. $300 per year for 5 years at 5%.
   $_____?   
   
6. $600 per year for 5 years at 0%.
   $_____?

A project with a life of 6 years is expected to provide annual sales of $460,000 and costs of $333,000. The project will require an investment in equipment of $790,000, which will be depreciated on a straight-line method over the life of the project. You feel that both sales and costs are accurate to +/-15 percent. The tax rate is 34 percent. What is the annual operating cash flow for the best-case scenario?

A. 50,080

B. 162,327

C. 128,390

D. 207,094

E. 167,742

You have looked at the current financial statements for Reigle Homes, Co. The company has an EBIT of $3,130,000 this year. Depreciation, the increase in net working capital, and capital spending were $239,000, $104,000, and $485,000, respectively. You expect that over the next five years, EBIT will grow at 20 percent per year, depreciation and capital spending will grow at 25 per year, and NWC will grow at 15 per year. The company currently has $17,900,000 in debt and 515,000 shares outstanding. After Year 5, the adjusted cash flow from assets is expected to grow at 3.5 percent indefinitely. The company’s WACC is 8.7 percent and the tax rate is 35 percent. What is the price per share of the company's stock? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Share price $

Ward Corp. is expected to have an EBIT of $2,700,000 next year. Depreciation, the increase in net working capital, and capital spending are expected to be $181,000, $117,000, and $131,000, respectively. All are expected to grow at 18 percent per year for four years. The company currently has $21,000,000 in debt and 810,000 shares outstanding. At Year 5, you believe that the company's sales will be $17,500,000 and the appropriate price–sales ratio is 2.7. The company’s WACC is 9.4 percent and the tax rate is 40 percent. What is the price per share of the company's stock? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Share price $

$10,000 is borrowed at 10% a year interest for five years. At the end of each year, the borrower pays interest plus 20% of the initial principal. Solve for the yearly payment and the remaining principle at the end of each year. Also, determine the total payment made over the 5 years.