Renegade Industries is considering the purchase of a new machine for the production of latex. Machine A costs $2.9 million and will last for six years. Variable costs are 31% of sales, and fixed costs are $2,004,327 per year. Machine B costs $4.89 million and will last for nine years. Variable costs for this machine are 22% of sales and fixed costs are $1,280,117 per year. The sales for each machine will be $9.3 million per year. The required return is 9 %, and the tax rate is 38%. Both machines will be depreciated on a straight-line basis. The company plans to replace the machine when it wears out on a perpetual basis.

Calculate the EAC for machine A. (Round answer to 2 decimal places. Do not round intermediate calculations)

Topic: Capital Budgeting Problem

Renegade Industries is considering the purchase of a new machine for the production of latex. Machine A costs $2.88 million and will last for six years. Variable costs are 33% of sales, and fixed costs are $1,967,572 per year. Machine B costs $5.15 million and will last for nine years. Variable costs for this machine are 20% of sales and fixed costs are $1,392,870 per year. The sales for each machine will be $10.2 million per year. The required return is 9 %, and the tax rate is 38%. Both machines will be depreciated on a straight-line basis. The company plans to replace the machine when it wears out on a perpetual basis.

Calculate the EAC for machine B. (Round answer to 2 decimal places. Do not round intermediate calculations)

Topic: Capital Budgeting Problem

Compute the fair value of a chooser option which expires after n = 10n=10 periods. At expiration the owner of the chooser gets to choose (at no cost) a European call option or a European put option. The call and put each have strike K = 100K=100 and they mature 5 periods later, i.e. at n = 15n=15

Instructions: Quiz Instructions: Option Pricing in the Multi-Period Binomial Questions 1-8 should be answered by building a 15-period binomial model whose parameters should be calibrated to a Black-Scholes geometric Brownian motion model with: T = .25T=.25 years, S_{0} = 100S 0 ​ =100, r = 2\%r=2%, \sigma = 30\%σ=30% and a dividend yield of c = 1\%.c=1%. Hint Your binomial model should use a value of u = 1.0395...u=1.0395.... (This has been rounded to four decimal places but you should not do any rounding in your spreadsheet calculations.) Submission Guidelines Round all your answers to 2 decimal places. So if you compute a price of 12.9876 you should submit an answer of 12.99.

Renegade Industries is considering the purchase of a new machine for the production of latex. Machine A costs $2.96 million and will last for six years. Variable costs are 34% of sales, and fixed costs are $2,061,224 per year. Machine B costs $5.12 million and will last for nine years. Variable costs for this machine are 21% of sales and fixed costs are $1,400,231 per year. The sales for each machine will be $9.6 million per year. The required return is 12 %, and the tax rate is 38%. Both machines will be depreciated on a straight-line basis. The company plans to replace the machine when it wears out on a perpetual basis.

Calculate the NPV for machine B. (Round answer to 2 decimal places. Do not round intermediate calculations)

Topic: Capital Budgeting Problem

1. Net Present Value (NPV) and Internal Rate of Return (IRR) (question)

The City and County of Denver is completing a $45 million renovation of City Park Golf Course. To complete the renovation, the course has been closed to the public for 2.5 years (planned re-opening is Spring 2020). The project updated the course, built a new clubhouse that can accommodate golf and community events, resulted in a “net gain of 500 trees”, and reduced flood risk “for thousands of homes”.[1] All of these updates are expected to provide either increased revenue or reduced costs. Assume the $45 million cost was paid upfront by Denver and the following are the estimated cash receipts and disbursements associated with the project.[1] If the cost of capital is 6%, does the project make sense based on NPV and IRR over a 30-year useful life? Does your finding change if the cost of capital is actually 4%?

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What is the expected return for the following stock? (State your answer in percent with one decimal place.)
Outcomes Possible returns Probability
better 36% 13%
same 25% 39%
worse 18% 48%

You are holding a stock that has a beta of 2.12 and is currently in equilibrium. The required return on the stock is 12.49%, and the return on the market portfolio is 10.00%. What would be the new required return on the stock if the return on the market increased to 13.00% while the risk-free rate and beta remained unchanged?

You are holding a stock that has a beta of 1.67 and is currently in equilibrium. The required return on the stock is 15.38% and the return on a risk-free asset is 7.0%. What would be the return on the stock if the stock's beta increased to 2.12 while the risk-free rate and market return remained unchanged?

You are offered an investment with a quoted annual interest rate of 11% with weekly compounding of interest. What is your effective annual interest rate?

You are valuing an investment that will pay you nothing the first two years, $21,000 the third year, $23,000 the fourth year, $27,000 the fifth year, and $33,000 the sixth year (all payments are at the end of each year). What is the value of the investment to you now if the appropriate annual discount rate is 15.00%?

2. Balance sheet

The balance sheet provides a snapshot of the financial condition of a company. Investors and analysts use the information given on the balance sheet and other financial statements to make several interpretations regarding the company’s financial condition and performance.

Cute Camel Woodcraft Company is a hypothetical company. Suppose it has the following balance sheet items reported at the end of its first year of operation. For the second year, some parts are still incomplete. Use the information given to complete the balance sheets for Cute Camel Woodcraft Company for the years ending December 31, Year 2 and 1, respectively.

Given the information in the preceding balance sheet—and assuming that Cute Camel Woodcraft Company has 50 million shares of common stock outstanding—read each of the following statements, then identify the selection that best interprets the information conveyed by the balance sheet.

Statement #1: Cute Camel’s pool of relatively liquid assets, which are available to support the company’s current and future sales, decreased from Year 1 to Year 2.

This statement is   , because:

Cute Camel’s total current liabilities balance increased from $33,750 to $42,188 between Year 1 and Year 2.

Cute Camel’s total current asset balance decreased from $281,250 to $225,000 between Year 1 and Year 2.

Cute Camel’s total current asset balance actually increased from $225,000 to $281,250 between Year 1 and Year 2.

Cute Camel’s total current liabilities balance decreased by $56,250 between Year 1 and Year 2.

Statement #2: On December 31 of Year 2, Cute Camel Woodcraft Company had $115,312 of actual money that it could have spent immediately.

This statement is   , because:

The funds recorded in Cute Camel’s accounts receivable account represents funds that are either cash or can be converted into cash almost immediately.

Cute Camel’s Year 2 cash and equivalents balance is $290,250.

The funds recorded in Cute Camel’s cash and equivalents account represents funds that are either cash or can be converted into cash almost immediately.

Statement #3: One way to interpret the change in Cute Camel’s accounts receivable balance from Year 1 to Year 2 is that more customers purchased new items on credit rather than paying off existing credit accounts.

This statement is   , because:

The decrease from $42,188 to $33,750 implies a net decrease in accounts receivable and that more customers are paying off their receivables balances than are buying on credit.

The $8,438 increase in accounts receivable means either that Year 1’s existing credit customers are not paying off their owed balances and new or existing customers are making additional purchases on credit, or that Year 1’s credit customers have repaid their owed balances and Year 2 credit sales have exceeded Year 1’s credit sales.

The change from $99,000 to $123,750 reflects a net accumulation of new credit sales.

Based on your understanding of the different items reported on the balance sheet and the information they provide, if everything else remains the same, then the cash and equivalents item on the current balance sheet is likely to   if the firm buys a new plant and equipment at a cost of $1 million with liquid capital.

Based on your understanding of the different items reported on the balance sheet and the information they provide, which statement regarding Cute Camel Woodcraft Company’s balance sheet is consistent with U.S. Generally Accepted Accounting Principles (GAAP)?

The company’s debts should be listed from those carrying the largest balance to those with the smallest balance.

The company’s debts are listed in the order in which they are to be repaid.

The company’s debts should be listed in order of their liquidity.

Brandtly Industries invests a large sum of money in R&D; as a result, it retains and reinvests all of its earnings. In other words, Brandtly does not pay any dividends, and it has no plans to pay dividends in the near future. A major pension fund is interested in purchasing Brandtly's stock. The pension fund manager has estimated Brandtly's free cash flows for the next 4 years as follows: $3 million, $6 million, $9 million, and $13 million. After the fourth year, free cash flow is projected to grow at a constant 5%. Brandtly's WACC is 10%, the market value of its debt and preferred stock totals $72 million; the firm has $13 million in non-operating assets; and it has 18 million shares of common stock outstanding.

1. What is the present value of the free cash flows projected during the next 4 years? Do not round intermediate calculations. Round your answer to the nearest dollar. Write out your answers completely. For example, 13 million should be entered as 13,000,000.
2. 
   
3. What is the firm's horizon, or continuing, value? Round your answer to the nearest dollar. Write out your answers completely. For example, 13 million should be entered as 13,000,000.
4. What is the market value of the company's operations? Do not round intermediate calculations. Round your answer to the nearest dollar. Write out your answers completely. For example, 13 million should be entered as 13,000,000.
5. 
   
6. What is the firm's total market value today? Do not round intermediate calculations. Round your answer to the nearest dollar. Write out your answers completely. For example, 13 million should be entered as 13,000,000.
7. What is an estimate of Brandtly's price per share? Do not round intermediate calculations. Round your answer to the nearest cent.

Please show me how to do it and not just the answer please and thank you!

A project has an annual cash flow of $8000 for first 10 years and $11000 for the next 10 years, the cost of total investment was $90,000. The company’s WACC is 10% and IRR is 14%. What is the project’s payback and NPV?

Bigg company is evaluation two projects for next year’s capital budgeting. The after-tax cash flow ($) (including depreciation) are following:

Project A                              Project B

Year 0    -7500 -17500

Year 1    2000                                       5600

Year 2    2000                                       5600

Year 3    2000                                       5600

Year 4    2000                                       5600

Year 5    2000                                       5600

Year 6    4000                                       9000

If company’s WACC is 13%, find NPV, IRR, Payback and discount payback for each project. If the projects are mutually exclusive what is your recommendation to the company.(show working please)

You buy a 12-year 5 percent annual coupon bond at par value, $1,000. You sell the bond three years later for $1,200. What is your rate of return over this three-year period?

1. You are considering the bonds of Epsilon, Inc., a printer manufacturer. The bonds make semiannual payments and have five years to maturity, a coupon rate of 7%, and a redemption value of $1,000.

A. Determine the intrinsic value of these bonds assuming that your required rate of return is 10% (use the PV function.) B. Also determine the current yield and the yield to call (use the RATE function) if the bonds can be called in four years with a call premium of 2%.

(This needs to be done in Excel)

You invest $2,000 in a certificate of deposit that matures after eight years and pays 5 percent interest, which is compounded annually until the certificate matures. Round your answers to the nearest dollar. a.How much interest will you earn if the interest is left to accumulate? b. How much interest will you earn if the interest is withdrawn each year?