You are evaluating a product for your company. You estimate the sales price of product to be $240 per unit and sales volume to be 11,400 units in year 1; 26,400 units in year 2; and 6,400 units in year 3. The project has a 3 year life. Variable costs amount to $165 per unit and fixed costs are $214,000 per year. The project requires an initial investment of $366,000 in assets which will be depreciated straight-line to zero over the 3 year project life. The actual market value of these assets at the end of year 3 is expected to be $54,000. NWC requirements at the beginning of each year will be approximately 13% of the projected sales during the coming year. The tax rate is 30% and the required return on the project is 8%. What will the year 2 cash flows for this project be?

Suppose there is a mean-variance optimizer looking to invest for two periods in bonds. They
can invest in a two year bond with annual yield y2 or they can invest in the one year bond at r1 and then,
a year later, invest in another one year bond at currently uncertain rate r2. What must be the liquiditiy
premium in order for them to be indifferent between the two options?
Now suppose they are looking to invest for three years. What is the liquidity premium to make them
indifferent between the three year bond or getting a two year bond, then a one year bond after?
What if they want to invest for n years. Derive the liquidity premium to make them indifferent between the
n year bond and the n − 1 year bond followed by a one year bond.

A stock just paid a dividend of $1, and is estimated to have a dividend growth rate of 25% and 10% in the next two years. The stock is estimated to settle down to a 4% constant dividend growth thereafter. The required return of investors is 12%. (Round your answer to two digits after the decimal point.) show your work

What is the dividend of year 1?

What is the dividend of year 2?

What is the dividend of year 3?

What is the stock price at year 2?

What is the stock price at year 1?

What is the stock price at year 0?

What is the dividend yield of year 1?

What is the capital gain yield of year 1?

What is the dividend yield of year 10?

What is the capital gain yield of year 10?

Q)

Determine the present worth of a geometric gradient series with a cash flow of $38,537 in year 1 and increases of 11% each year begining of year 4 through year 11. The interest rate is 16% per year.

Q) The capital cost (CC), now, when a family want to have $6,004, per year, starting in year 26 and continuing forever, is close to. Assume  rate of return13%

Q)

Alternative X has a first cost of $20000, an operating cost of $9000 per year, and a $5000 salvage value after 6 years. Alternative Y will cost $18,898 with an operating cost of $7,514 per year and a salvage value of $7,270 after 3 years.  Note: i=0.12% refers to  i=12%

At an MARR of 0.12% per year, find the PW of machine Y?

Question 2/ Firm B next dividend will be $2.5 per share. The dividends are expected to grow during year 1 by 21.5% and during year 2 by 18.5%. From year 2 to year 6 they are expected to grow by 12%. From year 6 to year 12 there is no growth of the dividends. From year 12 there will be a constant growth rate of 8% forever. The required rate of return on the stocks is 11.5%. a/ Compute the intrinsic value of the stock now? (Show your steps) b/ Compute the intrinsic value of the stock at the end of year 2? (Show your steps) c/ Compute the intrinsic value of the stock at the end of year 8? (Show your steps) d/ Compute the intrinsic value of the stock at the end of year 22? (Show your steps)

Question 2/ Firm B next dividend will be $2.5 per share. The dividends are expected to grow during year 1 by 21.5% and during year 2 by 18.5%. From year 2 to year 6 they are expected to grow by 12%. From year 6 to year 12 there is no growth of the dividends. From year 12 there will be a constant growth rate of 8% forever. The required rate of return on the stocks is 11.5%.

a/ Compute the intrinsic value of the stock now? (Show your steps)
b/ Compute the intrinsic value of the stock at the end of year 2? (Show your steps)

c/ Compute the intrinsic value of the stock at the end of year 8? (Show your steps)

d/ Compute the intrinsic value of the stock at the end of year 22? (Show your steps)

Speedy delivery company on Jan. 1 2021, purchased a van for $20,000. to complete the purchase, the company also incurred $800 shipping cost and $1,200 sales tax.

Speedy estimates that at the end of its the four- year service life the van will be worth 4,000. during the four year period, the company expects to drive the van 100,000 miles. actual miles driven each year were 32,000 miles in year 1; 35,000 in year 2 and 27,000 in year 3 and 6,000 miles in year 4.

A. using straight depreciation method, what is annual depreciation expense?

B. Using the double declining balance method what are the amounts of depreciation expense for year 3 and year 4?

C. using activity-based method what is the balance of accumulated depreciation at the end of year 2?  

You have $1,000 to invest over an investment horizon of three years. The bond market offers various options. You can buy (i) a sequence of three one-year bonds; (ii) a three-year bond; or (iii) a two-year bond followed by a one-year bond. The current yield curve tells you that the one-year, two-year, and three-year yields to maturity are 3.5 percent, 4 percent, and 4.5 percent respectively. You expect that one-year interest rates will be 4 percent next year and 5 percent the year after that. Assuming annual compounding, compute the return on each of the three investments. Instructions: Enter your responses rounded to the nearest two decimal places. Expected return for (i) = ___% Expected return for (ii) =____ % Expected return for (iii) =____ %

Your company is deciding whether to invest in a new machine. The new machine will increase cash flow by $330,000 per year. You believe the technology used in the machine has a 10-year life; in other words, no matter when you purchase the machine, it will be obsolete 10 years from today. The machine is currently priced at $1,700,000. The cost of the machine will decline by $102,000 per year until it reaches $1,190,000, where it will remain.

a. If your required return is 14 percent, calculate the NPV if you purchase the machine today.

b. If your required return is 14 percent, calculate the NPV if you wait to purchase the machine until the indicated year.