An electric utility is considering a new power plant in northern Arizona. Power from the plant would be sold in the Phoenix area, where it is badly needed. Because the firm has received a permit, the plant would be legal; but it would cause some air pollution. The company could spend an additional $40 million at Year 0 to mitigate the environmental problem, but it would not be required to do so. The plant without mitigation would cost $270.11 million, and the expected cash inflows would be $90 million per year for 5 years. If the firm does invest in mitigation, the annual inflows would be $93.70 million. Unemployment in the area where the plant would be built is high, and the plant would provide about 350 good jobs. The risk adjusted WACC is 16%.

1. Calculate the NPV and IRR with mitigation. Round your answers to two decimal places. Enter your answer for NPV in millions. Do not round your intermediate calculations. For example, an answer of $10,550,000 should be entered as 10.55. Negative value should be indicated by a minus sign.
   NPV $
   IRR %

   Calculate the NPV and IRR without mitigation. Round your answers to two decimal places. Enter your answer for NPV in millions. Do not round your intermediate calculations. For example, an answer of $10,550,000 should be entered as 10.55.
   NPV $   
   IRR %

A company is considering a project that requires an initial investment of $56M to build a new plant and purchase equipment. The investment will be depreciated as a MACRS 10-year class (see p. 21 in the text) asset. The new plant will be built on some of the company’s land which has a current, after-tax market value of $5.5M. The company will produce units at a cost of $255 each and will sell them for $300 each. There are annual fixed costs of $1.5M. Unit sales are expected to be 275,000 each year for the next 9 years, at which time the project will be abandoned. At that time, the plant and equipment is expected to be worth $22M (before tax) and the land is expected to be worth $10M (after tax). To supplement the production process, the company will need to purchase $3M worth of inventory. That inventory will be depleted during the final year of the project. The company has $500M of debt outstanding with a yield-to-maturity of 8%, and has $600M of equity outstanding with a beta of 1.2. The expected market return is 13% and the risk-free rate is 5%.The company’s marginal tax rate is 35%. See Excel for solution. Is there a way i can put it into excel too?

1. What is the NPV of the project?

2. What is the IRR of the project?

3. What is the Pay-back period (discount and non-discount)

4. What is the profitability index?

5. Assuming the firm requires a 5 year pay-back period should the project be accepted?

6. Is there a problem of multiple cash-flows?

An electric utility is considering a new power plant in northern Arizona. Power from the plant would be sold in the Phoenix area, where it is badly needed. Because the firm has received a permit, the plant would be legal; but it would cause some air pollution. The company could spend an additional $40 million at Year 0 to mitigate the environmental problem, but it would not be required to do so. The plant without mitigation would cost $240.62 million, and the expected cash inflows would be $80 million per year for 5 years. If the firm does invest in mitigation, the annual inflows would be $84.19 million. Unemployment in the area where the plant would be built is high, and the plant would provide about 350 good jobs. The risk-adjusted WACC is 16%.

Calculate the NPV and IRR with mitigation. Enter your answer for NPV in millions. For example, an answer of $10,550,000 should be entered as 10.55. Negative values, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to two decimal places.

NPV: $ million

IRR: %

Calculate the NPV and IRR without mitigation. Enter your answer for NPV in millions. For example, an answer of $10,550,000 should be entered as 10.55. Negative values, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to two decimal places.

NPV: $ million

IRR: %

a. Before, lockdown due to COVID-19, the market for Mobile phones and Headphones in Karachi are at equilibrium with an equilibrium price of Rs. 50,000 and equilibrium quantity of 20,000 in the mobile phone market, and equilibrium price of Rs.1500 and equilibrium quantity of 12,000 in Headphone market. After the reopening the markets, and business in Karachi, the price of cell phones has increased from Rs.50, 000 to Rs. 70,000. What will be the impact of the increase in the price of cell phones in both the markets? Explain by using graphs. Draw the graphs for both the markets separately, labeling everything clearly. (2 Marks, 50-150 words)

Consider a market for ice cream a normal good in Pakistan. You are supposed to analyze and discuss the effect on the equilibrium output and the price in the ice cream market in Pakistan for May, 2020 after the following changes (Other things held constant). In each case, explain your answer using supply and demand diagram. (4 Marks, 50-250 words) There has been a decrease in people’s income and a rise in the price of sugar (an input for making ice cream) in Pakistan during 2020 due to COVID-19 crisis simultaneously. News reports on May 5, 2020 claim that the consumption of ice cream is good for the health of patients with coronavirus. An improvement in technology that allows ice cream to be built at half the cost in Pakistan during 2020. The weather has changed suddenly and the temperature reached 40 °C in May 2020 in Pakistan

An electric utility is considering a new power plant in northern Arizona. Power from the plant would be sold in the Phoenix area, where it is badly needed. Because the firm has received a permit, the plant would be legal; but it would cause some air pollution. The company could spend an additional $40 million at Year 0 to mitigate the environmental problem, but it would not be required to do so. The plant without mitigation would cost $210.64 million, and the expected cash inflows would be $70 million per year for 5 years. If the firm does invest in mitigation, the annual inflows would be $75.80 million. Unemployment in the area where the plant would be built is high, and the plant would provide about 350 good jobs. The risk adjusted WACC is 19%.

1. Calculate the NPV and IRR with mitigation. Round your answers to two decimal places. Enter your answer for NPV in millions. Do not round your intermediate calculations. For example, an answer of $10,550,000 should be entered as 10.55. Negative value should be indicated by a minus sign.
   NPV $   million
   IRR %

   Calculate the NPV and IRR without mitigation. Round your answers to two decimal places. Enter your answer for NPV in millions. Do not round your intermediate calculations. For example, an answer of $10,550,000 should be entered as 10.55.
   NPV $   million
   IRR %

Use the following information to answer questions 1-3.

Mitts Beverage Inc. manufactures and distributes fruit juice products. Mitts is considering the development of a new prune juice product. Mitts’ CFO has collected the following information regarding the proposed project:

· The company already owns a section of land where the facility could be built. The land is estimated to have a after tax market value of $1 million. The company plans to sell the land if it is not used for this project.

· The project will require that the company spend $1 million today (t = 0) to purchase a new machine. For tax purposes, the equipment will be depreciated on a straight-line basis. The company plans to use the machine for all 3 years of the project. At t = 3, the equipment is expected to have no salvage value.

· The project will require a $400,000 increase in inventory and $200,000 increase in accounts payable at t = 0. The cost of the net operating working capital will be fully recovered at t = 3.

· The project's incremental sales are expected to be $1 million a year for three years (t = 1, 2, and 3).

· The project’s annual operating costs (excluding depreciation) are expected to be 60% of sales.

· The company’s tax rate is 40%.

· The company’s interest expense each year will be $300,000.

· The project’s discount rate is 10%.

1. What is the initial investment for the project?

2. What is the annual expected incremental operating cash flow for years 1-3?

3. What is the project’s NPV?

5. CarPoint is a comprehensive consumer-oriented automotive web site offering users complete car-buying and care information on all makes and models. It provides fast, convenient access to detailed specifications and pricing information on both new and used cars. It also provides reviews and advice from leading automotive writers, and personalized maintenance and recall information. Ford Motor Company was CarPoint’s first partner. Ford’s concept is to allow consumers to order any model car to their exact specifications and receive immediate feedback on availability. Consumers are able to schedule delivery and service at their local dealership, making it easier for consumers to buy cars over the Internet. Once a consumer decides what car she wants to buy, CarPoint locates an existing car, regardless of where in the country it is, or they place an order for a new custom car to be built at the factory and delivered to the consumer’s local dealership. During the process, both the manufacturer and the dealer will get instant, online status reports on the order from the time the order is placed until it is delivered to the customer. Ford sees its advantage in better managing its order-fulfillment process. It streamlines production and allows better inventory management through its supply chain. Required: a. Think about a typical car-buying experience where a consumer visits dealership and buys a car. List the steps in that value chain, and discuss the time, quality, and cost of the experience to the consumer.

Marketing at Pepe’s Pizzeria focuses on the development, growth, and maintenance of cost-effective, high-value relationships with each of its customers. This type of marketing is known as _____.

a. direct marketing b. relationship marketing c. transaction-based marketing d. value-based marketing

The relationship between Pepe’s Pizzeria and its customers functions at which level of the relationship marketing continuum?

a. Fourth Level b. Third Level c. Second Level d. First Level

Pepe’s Pizzeria indulges in social interaction and interactive marketing with its customers on Twitter and Facebook. Thus, Pepe’s Pizzeria builds buyer–seller relationships through _____.

a. grassroots marketing b. database marketing c. frequency marketing d. interactive television

If Pepe’s Pizzeria built its brand equity by letting satisfied customers get the word out about its pizzas to other consumers, the type of marketing initiative used is known as _____.

a. affinity marketing b. ambush marketing c. viral marketing d. direct marketing

How can Pepe’s Pizzeria determine the costs it incurs to serve each customer and thus develop ways to increase its profitability?

a. By calculating the customer churn b. Through the payback method c. Through tracking rebates, coupons, and credit card purchases d. By calculating the lifetime value of its customers

In Figure 20.15, a rectangular current loop is carrying current I1 = 7.0 A, in the direction indicated near a long wire carrying a current Iw. The long wire is parallel to the sides of the rectangle. The rectangle loop has length 0.80 m and its sides are 0.10 m and 0.70 m from the wire. If the net force on the loop is to have magnitude 1.7x10^-6 and is to be directed towards the wire, what must be the (a) magnitude and (b) direction (from top to bottom or from bottom to top in the sketch) of the current Iw in the wire?

Note that:

\(\mu_{0}=4 \pi \times 10^{-7} \mathrm{~T} \cdot \mathrm{m} / \mathrm{A} .\)