Caspian Sea Drinks is considering the production of a diet drink. The expansion of the plant and the purchase of the equipment necessary to produce the diet drink will cost $27.00 million. The plant and equipment will be depreciated over 10 years to a book value of $2.00 million, and sold for that amount in year 10. Net working capital will increase by $1.21 million at the beginning of the project and will be recovered at the end. The new diet drink will produce revenues of $8.69 million per year and cost $1.84 million per year over the 10-year life of the project. Marketing estimates 19.00% of the buyers of the diet drink will be people who will switch from the regular drink. The marginal tax rate is 29.00%. The WACC is 13.00%. Find the NPV (net present value).

a. Find the duration of a 7% coupon bond making annual coupon payments if it has three years until maturity and has a yield to maturity of 7%. Note: The face value of the bond is $1,000.

b. What is the duration if the yield to maturity is 8.4%? Note: The face value of the bond is $1,000.

Part 8 New Primary Care Practices in Jasper

Determine the costs to MCH of establishing two new primary care practices in Jasper. The analysis should include estimates of all costs (recruitment, compensation arrangements, facility, staffing, information technology, etc.) and assess the advantages and disadvantages of leasing or purchasing building space.

Sandrine Machinery is a Swiss multinational manufacturing company. Currently, Sandrine's financial planners are considering undertaking a 1-year project in the United States. The project's expected dollar-denominated cash flows consist of an initial investment of $2,000 and a cash inflow the following year of $2,400. Sandrine estimates that its risk-adjusted cost of capital is 8%. Currently, 1 U.S. dollar will buy 0.85 Swiss franc. In addition, 1-year risk-free securities in the United States are yielding 2.6%, while similar securities in Switzerland are yielding 1.3%.

1. If this project was instead undertaken by a similar U.S.-based company with the same risk-adjusted cost of capital, what would be the net present value and rate of return generated by this project? Round the net present value to the nearest cent and rate of return to two decimal places.

   NPV = ----------$  

   Rate of return = ------------ %

2. What is the expected forward exchange rate 1 year from now? Do not round intermediate calculations. Round your answer to two decimal places.

   ---------- Swiss franc (SF_r) per U.S. $

3. If Sandrine undertakes the project, what is the net present value and rate of return of the project for Sandrine? Do not round intermediate calculations. Round the net present value to the nearest cent and rate of return to two decimal places.

   NPV = ------------Swiss francs

   Rate of return = ------------ %

The Neal Company wants to estimate next year's return on equity (ROE) under different financial leverage ratios. Neal's total capital is $13 million, it currently uses only common equity, it has no future plans to use preferred stock in its capital structure, and its federal-plus-state tax rate is 40%. The CFO has estimated next year's EBIT for three possible states of the world: $5 million with a 0.2 probability, $2.9 million with a 0.5 probability, and $0.4 million with a 0.3 probability. Calculate Neal's expected ROE, standard deviation, and coefficient of variation for each of the following debt-to-capital ratios. Do not round intermediate calculations. Round your answers to two decimal places at the end of the calculations.

Debt/Capital ratio is 0.

Debt/Capital ratio is 10%, interest rate is 9%.

Debt/Capital ratio is 50%, interest rate is 11%.

Debt/Capital ratio is 60%, interest rate is 14%.

The following are the projected cash flows to the firm over the next five years:

The firm has a cost of capital (WACC )of 12% and the cash flows are expected to grow at the rate of 4% in perpetuity?

a) What is the value of the firm today?

b) At what growth rate will the firm have a value of $3000 Million?

(Capsim Capstone) Please comment on the importance of analyzing your results before making new decisions. Feel free to comment on any of the following areas: R & D, marketing, production, finance, HR, or TQM.

Your neighbor approached you about a dilemma he has with his mortgage. He purchased his house in 2006 with a $600,000, 6% fixed rate, 30 year mortgage. Then the great recession hit. Today his house is estimated to be worth less than the balance he owes on the mortgage. Furthermore, he was forced to take a new job at 20% less than what he was earning when he purchased the house. Here in 2012, 72 months later, he is contemplating entering into a mortgage modification program sponsored by the government. It offers 3 options.

1. reducing the interest rate to 4.5%
2. forgiveness of $100,000 of the principle due and continuing at 6%
3. refinancing the balance due with a new 15 year, 4% mortgage

Which option would minimize his monthly mortgage payment? Assume all refinancing costs will be paid by the government.

1. Broussard Skateboard's sales are expected to increase by 20% from $7.6 million in 2016 to $9.12 million in 2017. Its assets totaled $2 million at the end of 2016. Broussard is already at full capacity, so its assets must grow at the same rate as projected sales. At the end of 2016, current liabilities were $1.4 million, consisting of $450,000 of accounts payable, $500,000 of notes payable, and $450,000 of accruals. The after-tax profit margin is forecasted to be 6%, and the forecasted payout ratio is 70%. Use the AFN equation to forecast Broussard's additional funds needed for the coming year. Round your answer to the nearest dollar. Do not round intermediate calculations.

A stock portfolio has an expected return of 12% and a standard deviation of 20%. A bond portfolio has an expected return of 6% and a standard deviation of 9%. The two portfolios have a correlation coefficient of 0.3. T-Bills have an expected return of 2%. Your coefficient of risk aversion is 7.

1. What is the expected return and standard deviation of the minimum variance portfolio?

Retirement planning  

   Hal​ Thomas, a 35​-year-old college​ graduate, wishes to retire at age 65. To supplement other sources of retirement​ income, he can deposit ​$2,100 each year into a​ tax-deferred individual retirement arrangement​ (IRA). The IRA will earn a return of 14​% over the next 30 years.

a.  If Hal makes​ end-of-year ​$2,100 deposits into the​ IRA, how much will he have accumulated in 30 years when he turns 65​?

b.  If Hal decides to wait until age 45 to begin making​ end-of-year ​$2,100 deposits into the​ IRA, how much will he have accumulated when he retires 20 years​ later?

c.  Using your findings in parts a and ​b, discuss the impact of delaying deposits into the IRA for 10 years​ (age 35 to age 45​) on the amount accumulated by the end of​ Hal's 65th

year.

d.  Rework parts ​a, b, and c assuming that Hal makes all deposits at the​ beginning, rather than the​ end, of each year. Discuss the effect of​ beginning-of-year deposits on the future value accumulated by the end of​ Hal's 65th year.

3. Pick three things that affect the value of options and explain why they affect the value of options the way they do. (9 pts.)

1. In your own words, describe what real options are in relation to capital budgeting. Describe two specific examples of real options. In general, how do real options tend to affect project NPVs and why? (10 pts.)