4. Find the Discounted Payback period for the following projects.

The discount rate is 7%.

Initial Outlay 17,827

Year 1 5917

Year 2 5484

Year 3 5968

Year 4 8405

The U.S. government has decided to decrease the corporate tax rate from 35% to 20% (for the record, I originally wrote this problem long before this actually happened). You have been tasked with re-estimating the remaining PV of a project’s cash flows. The project will operate for the next 4 years before shutting down. It will produce yearly revenue of $40k with yearly operating costs of $20k. The project utilizes some heavy machinery which has a current book value of $80k and is being depreciated on a straight-line basis by $15k per year for the remainder of the project. (IMPORTANT: This does not mean that you purchase the machine today for $80k. You bought the machine in the past when you started the project). The machinery will have a resell value of $30k at the completion of the project. The firm’s discount rate is 10%.

2. Compute the after-tax salvage both before and after the tax change.

JK Manufacturing is considering a new product and is unsure about its price as well as the variable cost associated with it. JK's marketing department believes that the firm can sell the product for $500 per unit, but feels that if the initial market response is weak, the price may have to be 20% lower in order to be competitive with existing products. The firm's best estimates of its costs are fixed coists of $3.6 million and variable cost of $325 per unit. Concern exists with regard to the variable cost per unit due to currently volatile raw material and labor costs. Although the firm expects this cost to be about $325 per unit, it could be as much as 8% above that value. The firm expects to sell about 50,000 units per year.

a) Calculate the firm breakeven point (BEP) assuming its initial estimates are accurate.

b)Perform a sensitivity analysis by calculating the breakeven point for all combinations of the sale price per unit and variable cost per unit. (Hint: There are four combinations.)

c) In the best case, how many units will the firm need to sell to break even?

d) In the worst case, how many units will the firm need to sell to break even?

e) If each of the possible price/variable cost combinations is equally probable, what is the firm's expected breakeven point?

f)Based on your finding in part (e), should the firm go forward with the proposed new product? Explain why or why not.

You buy an annuity-immediate for $5000 that pays $200 quarterly for next 8 years. Calculate the nominal annual interest rate convertible half-yearly.

A project requires an initial investment of $100,000 and is expected to produce a cash inflow before tax of $26,000 per year for five years. Company A has substantial accumulated tax losses and is unlikely to pay taxes in the foreseeable future. Company B pays corporate taxes at a rate of 21% and can claim 100% bonus depreciation on the investment. Suppose the opportunity cost of capital is 8%. Ignore inflation.

a. Calculate project NPV for each company. (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.)

b. What is the IRR of the after-tax cash flows for each company? (Do not round intermediate calculations. Enter your answers as a percent rounded to 1 decimal places.)

Explain what is meant by the time value of money, and discuss its relevance to the capital budgeting process.

Please type out and use a different answer in your own words that differ from what's already on the Chegg database, please and thank you!

Current position of the organisation: Provide an outline of goals and the philosophy of the organisation. Present the current target market and performance of the organisation.
2. Analysis of the business environment: Effectively assess the Micro-Environment, Market / Task environment and Macro-Environment of your organisation.
3. Roles and skills of managers: To discuss the overlapping roles of managers and the skills required of them in order to take the organisation. The management style of the management team and its relevance to the achievement of the organisational goals.   
4. Human Resources: An assessment of the organisations human resources in terms of skills, motivation and retention.   
5. Change Management: Ways in which management can react to the changing business environment. Discuss the inter-related approaches which the organisation can adopt in reacting to the environment.   
6. Organisation Design: The fundamental principles underlying organisation design should be discussed. Evaluate the organisational structure of the organisation and its suitability for the growth and expansion of the organisation
7. Recommendations: Present possible recommendations and critical success factors that the organisation should implement to achieve the desired goals.   

The following table tracks the main components of working capital over the life of a four-year project.

Calculate net working capital and the cash inflows and outflows due to investment in working capital. (Negative answers should be indicated by a minus sign.)

brief IRAC of case 40.1 Oliveira v. Sugarman

A bank has issued a six-month, $2.9 million negotiable CD with a 0.45 percent quoted annual interest rate (i_{CD, sp}).

a. Calculate the bond equivalent yield and the EAR on the CD.
b. How much will the negotiable CD holder receive at maturity?
c. Immediately after the CD is issued, the secondary market price on the $3 million CD falls to $2,899,000. Calculate the new secondary market quoted yield, the bond equivalent yield, and the EAR on the $2.9 million face value CD.

Calculate the bond equivalent yield and the EAR on the CD. (Use 365 days in a year. Do not round intermediate calculations. Round your answers to 3 decimal places. (e.g., 32.161))

How much will the negotiable CD holder receive at maturity? (Do not round intermediate calculations. Round your answer to nearest whole number. (e.g., 32))

Immediately after the CD is issued, the secondary market price on the $3 million CD falls to $2,899,000. Calculate the new secondary market quoted yield, the bond equivalent yield, and the EAR on the $2.9 million face value CD. (Use 365 days in a year. Do not round intermediate calculations. Round your answers to 4 decimal places. (e.g., 32.1616))

Ratios are mostly calculated using data drawn from the financial statements of a firm. However, another group of ratios, called market value ratios, relate to a firm’s observable market value, stock prices, and book values, integrating information from both the market and the firm’s financial statements.

Consider the case of Cute Camel Woodcraft Company:

Cute Camel Woodcraft Company just reported earnings after tax (also called net income) of $9,000,000 and a current stock price of $20.25 per share. The company is forecasting an increase of 25% for its after-tax income next year, but it also expects it will have to issue 2,500,000 new shares of stock (raising its shares outstanding from 5,500,000 to 8,000,000).

If Cute Camel’s forecast turns out to be correct and its price/earnings (P/E) ratio does not change, what does the company’s management expect its stock price to be one year from now? (Round any P/E ratio calculation to four decimal places.)

$17.41 per share

$20.25 per share

$13.06 per share

$21.76 per share

One year later, Cute Camel’s shares are trading at $49.60 per share, and the company reports the value of its total common equity as $27,856,000. Given this information, Cute Camel’s market-to-book (M/B) ratio is   .

Can a company’s shares exhibit a negative P/E ratio?

Yes

No

Which of the following statements is true about market value ratios?

Low P/E ratios could mean that the company has a great deal of uncertainty in its future earnings.

High P/E ratios could mean that the company has a great deal of uncertainty in its future earnings.

Of the four popular investment appraisal technique, recommend either one or two techniques that shall remain most useful when examining the current expectations of shareholders particularly when reviewing ROI impact surrounding capital investments? Is it really essential to consider economic factors and business conditions apart from following changes in social, environmental and political uncertainties, apart fromfactoring ‘time value of money’ considerations’, when estimating FV of ‘cash flows’, analyze ‘opportunity costs’ and the ‘eventual financial health of the organization’ to support a risk free judgement for backing capital investment decision-making?.

Let’s say if we are ignore these factors….would organizational leaders run the risk of bankruptcy or worse still a financial irreversible calamity?...

Ann is looking for a fully amortizing 30 year Fixed Rate Mortgage with monthly payments for $3,200,000. Mortgage A has a 4.38% interest rate and requires Ann to pay 1.5 points upfront. Mortgage B has a 6% interest rate and requires Ann to pay zero fees upfront. Assuming Ann makes payments for 2 years before she sells the house and pays the bank the balance, what is Ann’s annualized IRR from mortgage A