Discuss and explain briefly about each examples of the terms
below in a consumer contract that might be unfair:
• a term that permits, or has the effect of permitting, one party
(but not another party) to avoid or limit performance of the
contract;
• a term that permits, or has the effect of permitting, one party
(but not another party) to terminate the contract.
• a term that penalises, or has the effect of penalising, one party
(but not another party) for a breach or termination of the
contract;
• a term that permits, or has the effect of permitting, one party
(but not another party) to vary the terms of the contract;
• a term that permits, or has the effect of permitting, one party
(but not another party) to renew or not renew the contract;
.: a term that permits, or has the effect of permitting, one party
to vary the upfront price payable under the contract without the
right of another party to terminate the contract; .,.
• a term that permits, or has the effect of permitting, one party
unilaterally to vary the characteristics of the goods or services
to be supplied, or the interest in land to be sold or granted,
under the contract;
• a term that permits, or has the effect of permitting, one party
unilaterally to determine whether the contract has been breached or
to interpret its meaning;
• a term that limits, or has the effect of limiting, one party's
vicarious liability for its agents;
• a term that permits, or has the effect of permitting, one party
to assign the contract to the detriment of another party without
that other party's consent;
• a term that limits, or has the effect of limiting, one party's
right to sue another party;
• a term that limits, or has the effect of limiting, the evidence
one party can adduce in proceedings relating to the contract;
• a term that imposes, or has the effect of imposing, the
evidential burden on one party in proceedings relating to the
contract;
• a term of a kind, or a term that has an effect of a kind,
prescribed by the regulations.
In: Finance
|
Aria Acoustics, Inc. (AAI), projects unit sales for a new seven-octave voice emulation implant as follows: |
| Year | Unit Sales | |
| 1 | 71,500 | |
| 2 | 87,800 | |
| 3 | 104,300 | |
| 4 | 89,200 | |
| 5 | 75,300 | |
|
Production of the implants will require $1.5 million in net working capital to start and additional net working capital investments each year equal to 15 percent of the projected sales increase for the following year. Total fixed costs are $2.15 million per year, variable production costs are $230 per unit, and the units are priced at $375 each. The equipment needed to begin production has an installed cost of $20.5 million. Because the implants are intended for professional singers, this equipment is considered industrial machinery and thus qualifies as seven-year MACRS (MACRS Table) property. In five years, this equipment can be sold for about 20 percent of its acquisition cost. AAI has a 21 percent tax rate and a required return on all its projects of 15 percent. |
| a. | What is the NPV of the project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
| b. | What is the IRR? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
In: Finance
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Bausch Company is presented with the following two mutually exclusive projects. The required return for both projects is 15 percent. |
| Year | Project M | Project N |
| 0 | –$140,000 | –$359,000 |
| 1 | 61,500 | 159,300 |
| 2 | 73,400 | 168,400 |
| 3 | 68,100 | 154,800 |
| 4 | 40,500 | 110,400 |
| a. |
What is the IRR for each project? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
| b. | What is the NPV for each project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
| c. | Which, if either, of the projects should the company accept? |
In: Finance
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A proposed cost-saving device has an installed cost of $565,000. The device will be used in a five-year project but is classified as three-year MACRS property for tax purposes. The required initial net working capital investment is $40,000, the tax rate is 23 percent, and the project discount rate is 12 percent. The device has an estimated Year 5 salvage value of $55,000. What level of pretax cost savings do we require for this project to be profitable? MACRS schedule (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
In: Finance
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Doak Corp. is evaluating a project with the following cash flows. The company uses a discount rate of 11 percent and a reinvestment rate of 8 percent on all of its projects. |
| Year | Cash Flow | |||
| 0 | –$ | 32,600 | ||
| 1 | 11,520 | |||
| 2 | 14,670 | |||
| 3 | 11,270 | |||
| 4 | 10,940 | |||
| 5 | – | 4,230 | ||
|
Calculate the MIRR of the project using all three methods with these interest rates. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) |
In: Finance
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The Yurdone Corporation wants to set up a private cemetery business. According to the CFO, Barry M. Deep, business is “looking up.” As a result, the cemetery project will provide a net cash inflow of $164,000 for the firm during the first year, and the cash flows are projected to grow at a rate of 4.7 percent per year forever. The project requires an initial investment of $1,825,000. |
| a. |
If Yurdone requires a return of 12 percent on such undertakings, what is the NPV of the project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
| b. | The company is somewhat unsure about the assumption of a 4.7 percent growth rate in its cash flows. At what constant growth rate would the company just break even if it still required a return of 12 percent on its investment? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
In: Finance
| A project that provides annual cash flows of $2,620 for eight years costs $9,430 today. |
| a. | At a required return of 8 percent, what is the NPV of the project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
| b. | At a required return of 24 percent, what is the NPV of the project? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
| c. | At what discount rate would you be indifferent between accepting the project and rejecting it? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
In: Finance
Some characteristics of the determinants of nominal interest rates are listed as follows. Identify the components (determinants) and the symbols associated with each characteristic:
|
Characteristic |
Component |
Symbol |
|---|---|---|
| This is the premium added as a compensation for the risk that an investor will not get paid in full. | ||
| This is the premium added to the equilibrium interest rate on a security that cannot be bought or sold quickly enough to prevent or minimize loss. | ||
| As interest rates rise, bond prices fall, and as interest rates fall, bond prices rise. Because interest rate changes are uncertain, this premium is added as a compensation for this uncertainty. | ||
| This is the rate for a short-term riskless security when inflation is expected to be zero. | ||
| This is the rate for a riskless security that is exposed to changes in inflation. | ||
| Over the past several years, Germany, Japan, and Switzerland have had lower interest rates than the United States due to lower values of this premium. |
In: Finance
You are considering a project that will cost $50,000 to set up, and will pay out $18,000 1, 2, 3
and 4 years from today. The unlevered beta for this project is 1.2, the risk free rate is 6.5%, and
the expected return on the S&P 500 is 15%. Corporate taxes are 25%.
a.
What is the unlevered cost of equity for this project?
b. What is the NPV of this project if you finance with all equity?
c.
You are considering borrowing $30,000 to finance this project, with repayment in 4
years. You could normally borrow at 7.5%. The Nebraska state government has offered
to lend you the money at 6%. What is the adjusted present value of this project if you
take the subsidized loan?
In: Finance
Reinegar Corporation is planning two new issues of 25-year bonds. Bond Par will be sold at its $1,000 par value, and it will have a 10% semiannual coupon. Bond OID will be an Original Issue Discount bond, and it will also have a 25-year maturity and a $1,000 par value, but its semiannual coupon will be only 4%. If both bonds are to provide investors with the same effective yield, how many of the OID bonds must Reinegar issue to raise $3,000,000? Disregard flotation costs, and round your final answer up to a whole number of bonds.
Select the correct answer.
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In: Finance
A company is considering different options with respect to the current asset policy. In all instances, the firms fixed assets will be $1,000,000 and the firm plants to use of debt ration of 70% (D/TA = 0.7). The market interest rate is 9% on all debt used (both short and long term). Two options are under consideration: Option 1 - hold current assets equal to 30% of projected sales. Option 2 - hold current assets equal to 60% of projected sales. The company forecasts it will earn 25% of sales before paying interest (EBIT = 0.25 * Sales) and projects to do $3,000,000 in sales. Finally, the federal and state tax rate is 35%. What is the ROE for each option?
In: Finance
Refer to Table 10-1, which is based on bonds paying 10 percent interest for 20 years. Assume interest rates in the market (yield to maturity) decline from 20 percent to 13 percent.
a. What is the bond price at 20 percent?
b. What is the bond price at 13 percent?
c. What would be your percentage return on investment if you bought when rates were 20 percent and sold when rates were 13 percent? (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)
In: Finance
State of the Economy of Each Rates of Return If State occurs
|
State Occuring |
|
|
Deep Recession |
.20 |
|
Mild Recession |
.20 |
|
Average |
.20 |
|
Mild boom |
.20 |
|
Strong boom |
.20 |
|
Stock A |
Market |
|
(20%) |
(30%) |
|
10 |
5 |
|
15 |
20 |
|
20 |
25 |
|
25 |
30 |
PLEASE: If possible, do step by step with the Financial calculator HP10BII
In: Finance
1.) For an annual interest rate of 2.75%(compunded semi-annually), what mortgage loan can be obtained with constant bi-weekly payments of $1,000 over 25 years? Why it is more or less than $500,000?
2.) For an annual interest rate of 2.75%(compunded semi-annually), what mortgage loan can be obtained with constant annual payments of $26,000 over 25 years? Why your answers are different in 1) and 2) even though you make the same annual payment of $26,000
In: Finance
5. Farah’s Fashions (FF) makes designer clothes. FF’s factory can produce 10,000 garments for $14. FF can produce another 20,000 garments, but it will have to operate two more shifts increasing the per unit price to $22 each for these garments. There is a 10% chance the fashions will be a hit and FF can sell garments for $50 each. There is a 20% chance the fashion will flop and the garments will have to be heavily discounted and sold for $5 each. There is a 70% chance the fashion will be moderately successful and the garments can be sold for $20 each. The garments will all be sold in one year and, for simplicity, assume FF’s cost of capital is zero. What is the expected selling price for a garment, how many garments would FF produce to sell at this price and what is the NPV at this sells level? What is the value (NPV) of the project if you can wait to decide how much to produce next year?
6. A firm with a current value (cost) of $800 and will return $1,000 next year. The firm also has a potential project that costs $500 and will return $550 next year, but the firm does not have the money to invest and must raise it from outside investors. However, outside investors mistakenly believe the firm will be worth $820 in one year without the project and $13,030 with the project. For simplicity, assume a zero discount rate. Does the project have a positive NPV? Acting on behalf of existing shareholders, should you take the project?
7. An automated machine costs $1,000 and has a 20% probability of breaking irreparably at the end of each year (assuming it was working in the previous year). The machine has a maximum five-year life and will be disposed of with zero value at the end of five years. The machine produces $400 of cashflow at the end of each year and the discount rate is 10% per year. What is the most likely number of years the machine will last and what would the machines value be?
13. Crazy Cliff’s Car Coral (CCCC) is considering buying a company van for $50,000. CCCC expects the van to last 5 years and be disposed of at the end of 5 years for $5,000. CCCC will fully depreciate the van over 5 years using straight-line depreciation. CCCC expects the van to increase sales by $30,000 per year over the life of the van. CCCC also expects maintenance costs to be $4,000 per year. CCCC’s tax rate is 25% and its cost of capital is 10%. What are CCCC’s net income and cashflow in each year? What is the NPV of the van?
In: Finance