You are evaluating a project for The Farpour golf club, guaranteed to correct that nasty slice. You estimate the sales price of The Tiff-any to be $400 per unit and sales volume to be 1000 units in year 1; 1500 units in year 2; and 1325 units in year 3. The project has a three-year life. Variable costs amount to $225 per unit and fixed costs are $100,000 per year. The project requires an initial investment of $165,000 in assets which will be depreciated straight-line to zero over the three-year project life. The actual market value of these assets at the end of year 3 is expected to be $35,000. NWC requirements at the beginning of each year will be approximately 20 percent of the projected sales during the coming year. The tax rate is 34 percent and the required return on the project is 10 percent. What change in NWC occurs at the end of year 1?

?

A company has to choose between two different investments.

Investment A: This investment requires an immediate outlay of $60,000 and another investment of $50,000 in year 3. The investment will return annual profits of $45,000 from year 2 to year 8. At the end of year 8, the investment has a residual value of $20,000.

Investment B: This investment requires an immediate outlay of $25,000 and additional investments of $10,000 per year from year 1 to year 3. The investment will return annual profits of $28,000 from year 4 to year 8. At the end of year 8, the investment has a residual value of $20,000.

The cost of capital is 7.5%.

a. Calculate the NPV for investment A.

Round to the nearest cent

b. Calculate the NPV for investment B.

Round to the nearest cent

c. Which investment should the company choose?

Investment A

Investment B

Niether

Your company has spent $180,000 on research to develop a new computer game. The firm is planning to spend $40,000 on a machine to produce the new game. Shipping and installation costs of $5,000 for the machine will be capitalized and depreciated. The machine has an expected life of five years, a $25,000 estimated resale value, and falls under the MACRS five-year class life. Revenue from the new game is expected to be $200,000 per year, with costs of $100,000 per year. The firm has a tax rate of 35 percent, an opportunity cost of capital of 14 percent, and it expects net working capital to increase by $50,000 at the beginning of the project. What will be the operating cash flow (OCF) for year two of this project?

MACRS rates:

   Year 1: 20.00%

   Year 2: 32.00%

   Year 3: 19.20%

   Year 4: 11.52%

   Year 5: 11.52%

   Year 6: 5.76%

You are evaluating a product for your company. You estimate the sales price of product to be $160 per unit and sales volume to be 10,600 units in year 1; 25,600 units in year 2; and 5,600 units in year 3. The project has a 3 year life. Variable costs amount to $85 per unit and fixed costs are $206,000 per year. The project requires an initial investment of $342,000 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 $46,000. NWC requirements at the beginning of each year will be approximately 16% of the projected sales during the coming year. The tax rate is 30% and the required return on the project is 11%. What will the year 2 cash flows for this project be?

Multiple Choice

• $1,234,000

• $1,120,000

• $1,600,000

• $1,746,000

You are evaluating a project for your company. You estimate the sales price to be $300 per unit and sales volume to be 4,000 units in year 1; 5,000 units in year 2; and 3,500 units in year 3. The project has a three-year life. Variable costs amount to $150 per unit and fixed costs are $200,000 per year. The project requires an initial investment of $231,000 in assets which will be depreciated straight-line to zero over the three-year project life. The actual market value of these assets at the end of year 3 is expected to be $40,000. NWC requirements at the beginning of each year will be approximately 10 percent of the projected sales during the coming year. The tax rate is 30 percent and the required return on the project is 10 percent. What is the operating cash flow for the project in year 2?

There is a 0.9986 probability that a randomly selected 31 year old male lives through the year. A life insurance company charges $185 for insuring that the male will live through the year. If male does not survive the year, the policy pays $120,000 As a death benefit. Complete parts
a. From the perspective of the 31 year old male, what are the monetary value corresponding to the two events of surviving the year and not surviving?

the value corresponding to surviving the year is $

the value corresponding to not surviving the year is $

(Type integers or decimals. Do not round)

b. If the 31 year old male purchase the policy, what is his expected value?

the expected value is $

(round to the nearest cent as needed)

c. Can the insurance expect to make a profit from many such policies? Why?

Imaging Inc., a developer of radiology equipment, has stock outstanding as follows: 16,000 shares of cumulative preferred 4% stock, $150 par, and 53,000 shares of $15 par common. During its first four years of operations, the following amounts were distributed as dividends: first year, $64,320; second year, $137,680; third year, $168,850; fourth year, $191,930.

Compute the dividends per share on each class of stock for each of the four years. Round all answers to two decimal places. If no dividends are paid in a given year, enter "0".

Lightfoot Inc., a software development firm, has stock outstanding as follows: 30,000 shares of cumulative preferred 4% stock, $25 par, and 38,000 shares of $50 par common. During its first four years of operations, the following amounts were distributed as dividends: first year, $11,400; second year, $18,900; third year, $88,580; fourth year, $128,040. Calculate the dividends per share on each class of stock for each of the four years. Round all answers to two decimal places. If no dividends are paid in a given year, enter "0". 1st Year 2nd Year 3rd Year 4th Year

Preferred stock (dividend per share)

Common stock (dividend per share)

Seventy-Two Inc., a developer of radiology equipment, has stock outstanding as follows: 80,100 shares of cumulative preferred 4% stock, $15 par, and 401,700 shares of $26 par common. During its first four years of operations, the following amounts were distributed as dividends: first year, $55,800 ; second year, $76,400 ; third year, $80,100 ; fourth year, $98,700 .

Calculate the dividends per share on each class of stock for each of the four years. Round all answers to two decimal places. If no dividends are paid in a given year, enter "0".

Lightfoot Inc., a software development firm, has stock outstanding as follows: 15,000 shares of cumulative preferred 4% stock, $25 par, and 19,000 shares of $50 par common. During its first four years of operations, the following amounts were distributed as dividends: first year, $5,700; second year, $9,450; third year, $44,860; fourth year, $66,110.

Calculate the dividends per share on each class of stock for each of the four years. Round all answers to two decimal places. If no dividends are paid in a given year, enter "0".