To solve the bid price problem presented in the text, we set the project NPV equal to zero and found the required price using the definition of OCF. Thus the bid price represents a financial break-even level for the project. This type of analysis can be extended to many other types of problems. Martin Enterprises needs someone to supply it with 145,000 cartons of machine screws per year to support its manufacturing needs over the next five years, and you’ve decided to bid on the contract. It will cost you $1,010,000 to install the equipment necessary to start production; you’ll depreciate this cost straight-line to zero over the project’s life. You estimate that, in five years, this equipment can be salvaged for $145,000. Your fixed production costs will be $585,000 per year, and your variable production costs should be $19.35 per carton. You also need an initial investment in net working capital of $130,000. Assume your tax rate is 25 percent and you require a return of 10 percent on your investment. a. Assuming that the price per carton is $30.00, what is the NPV of this project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. Assuming that the price per carton is $30.00, find the quantity of cartons per year you can supply and still break even. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) c. Assuming that the price per carton is $30.00, find the highest level of fixed costs you could afford each year and still break even. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Question 3 －－－－－finance corporate

The investment advisors always said “Don’t put all your eggs in one basket”. Do you agree? Discuss your viewpoints within 500 words. Use examples to illustrate your arguments and justify your conclusion.

1. I am considering one of two investments Growth, Inc and Value, Inc. The Treasury bill rate is 3% (risk-free rate) and the market or equity risk premium is 8%. Growth, Inc. costs $1,000 per share, has a P/E ratio of 75 and a beta of 3. Value, Inc. costs $100 per share, has a P/E ratio of 18 and a beta of 1. What are the implied growth rates for each of the firms? What are the PVGO (present value of growth opportunities) for each firm? If I form a portfolio with 100 shares of each, what is the beta and what is the P/E ratio of the portfolio?

. Consider a new line of equipment that will cost $1.7 million and will save a company $300,000 in operating expenses for the next ten years. The estimated salvage value in ten years is $250,000. The new equipment will not affect sales, but it will result in an increase in Net Working Capital of $230,000.

The new line will replace an old line of equipment that will last for four more years before it could be scrapped for $75,000. If sold today, the old equipment is worth $180,000. The old equipment was purchased five years ago for $1.1m and is being depreciated using the MACRS 7-year rates. The new equipment will also be depreciated using the 7-year rates. The company’s marginal tax rate is 30% and their cost of capital is 10%.

Calculate the NPV and IRR of this replacement project. What is the breakeven salvage value for the new machinery?   (20 pts.)

MACRS 7-year rates:

the following techniques for analyzing projects:

1. Payback Rule
2. Discounted Payback Period
3. Net Present Value
4. Internal Rate of Return

Why must corporate managers use multiple techniques of project evaluation?

Which technique is most commonly used and why?

Describe several ways the techniques above can be used as one progresses in their professional career. (Identify specific types of projects that can be analyzed and discuss the advantages and disadvantages of using the techniques above)

The following table lists the discount factors implied by the government spot curve for the next 4 years:

What would be the price of a 4 year 3.98% coupon bond with a Z spread of 89 bps, per $100 of par value?

Enter answer in percents.

Correct answer: 82.1536

1. Patricia has been renting a two bedroom house for years. She pays $1000 per month in rent for the apartment and $400 per year in property and liability insurance. The owner of the house wants to sell it, and Patricia is considering making an offer. The owner wants $180,000 for the property, but Patricia thinks she could get the house for $170,000 and use her $20,000 in 3% CDs that are ready to mature for the down payment. Patricia has talked to her bank and could get a 4.5% mortgage loan for 30 years to finance the remainder of the purchase price. Property taxes on the house are $2000 per year. Insurance would need to be upgraded to $900 a year and Patricia would incur about $1000 in costs the first year for maintenance. Property values are increasing at about 2% per year in the neighborhood. Patricia is in the 25% marginal tax bracket.
2. calculate the monthly mortgage payment for the mortgage loan.
3. whether Patricia should continue renting or would she be better off buying the home. For any numbers not included in the scenario but are on the worksheet just leave blank.

Real Madrid stadium requires seats for home and away end. The seating project results in $1.2 MM/yr of annual savings. The seating project requires a fixed capital investment of $3.5 MM. The working capital investment is taken as 15/85 of the fixed capital investment. The annual operating cost of the stadium seating is $0.5 MM/yr. Straight-line depreciation is calculated over 10 years (no salvage value). The corporate income tax rate for the project is 35%. Assuming a discount rate of 15%.. Assume that the FCI and WCI are expended immediately at the outset of the project.

a. Determine the NPV after 10 years, the Discounted Cash Flow Payback Period and the Discounted Cash Flow Return on Investment

i need 500 words on this topic no copy paste please.

Is the stock market "out of control?" How can the poor benefit from this financial institution?

Historically, big-firm stocks are riskier than bonds, True/False? Explain briefly.

Risk and return You are considering an investment in the stock market and have identified two potential stocks, they are Westpac Banking Corp. (ASX: WBC) and Singapore Airlines Ltd. (SGX: C6L). The historical prices for the past 10 years are shown in the table below.

1. Which stocks would you prefer to own? Would everyone make the same choice? Explain your answer(s).

2. Calculate the correlation coefficient between the two stocks. Does it appear that a portfolio consisting of WBC and C6L would provide good diversification? Explain your answer(s).

3. Calculate the expected (annual) return if you owned a portfolio consisting of 50% in WBC and 50% in C6L. Would you prefer the portfolio to owning either of the stocks alone?