(IRR calculation) Determine to the nearest percent the IRR on the following projects:

a. An initial outlay of $9,000 resulting in a free cash flow of $3,000 at the end of year 1, $6 ,000 at the end of year 2, and $8,500 at the end of year 3

b. An initial outlay of $9,000 resulting in a free cash flow of $8,500 at the end of year 1, ?$6,000 at the end of year 2, and $ 3,000 at the end of year 3

c. An initial outlay of $9,000 resulting in a free cash flow of $3,000 at the end of years 1 through 5 and $6,000 at the end of year 6

Natcher Corporation’s accounts receivable at the end of Year 2 was $148,000 and its accounts receivable at the end of Year 1 was $156,000. The company’s inventory at the end of Year 2 was $151,000 and its inventory at the end of Year 1 was $143,000. Sales, all on account, amounted to $1,404,000 in Year 2. Cost of goods sold amounted to $822,000 in Year 2. The company’s operating cycle for Year 2 is closest to: (Round your intermediate calculations to 1 decimal place.)

Multiple Choice

48.9 days

104.9 days

74.4 days

70.8 days

Find the present values of these ordinary annuities. Discounting occurs once a year. Do not round intermediate calculations. Round your answers to the nearest cent.

1. $900 per year for 14 years at 4%.

   $  

2. $450 per year for 7 years at 2%.

   $  

3. $600 per year for 7 years at 0%.

   $  

4. Rework previous parts assuming they are annuities due.

   Present value of $900 per year for 14 years at 4%: $  

   Present value of $450 per year for 7 years at 2%: $  

   Present value of $600 per year for 7 years at 0%: $

A company is developing a new product. The development of the product requires an initial investment of $160,000 with further investments of $90,000 in year 1, $60,000 in year 2 and $10,000 in year 3. The company will launch the product on the market in year 3 and the company expects annual profits of $60,000 from year 3 to year 7. At the end of year 7, the company expects to terminate the production line and sell it to a competitor for $80,000. The company's required rate of return is 7%.

a. Calculate the NPV for this product.

Round to the nearest cent

b. Should the company proceed with developing the product?

Yes

No

Find the present values of these ordinary annuities. Discounting occurs once a year. Round your answers to the nearest cent.

a. $300 per year for 10 years at 12%.

b. $150 per year for 5 years at 6%.

c. $800 per year for 8 years at 0%.

Rework previous parts assuming that they are annuities due. Round your answers to the nearest cent.

d. $300 per year for 10 years at 12%.

e. $150 per year for 5 years at 6%.

f. $800 per year for 8 years at 0%.

Sandpiper Company has 15,000 shares of cumulative preferred 2% stock, $150 par and 50,000 shares of $30 par common stock. The following amounts were distributed as dividends:

Determine the dividends per share for preferred and common stock for each year. Round all answers to two decimal places. If an answer is zero, enter '0'.

Suppose there are only 2 investment alternatives: a bank deposit that pays 4% per year and a 2-year coupon bond with 5% annual coupon rate and face value of $1,000. Assume the bank deposit and coupon bond are perfect substitutes. a) What is the market price of the bond at beginning of year 1? And year 2? b) Assume now that at the beginning of year 2, the deposit interest rate unexpectedly increases to 6% annual. What is the market price of the bond at the beginning of year 2? What is the yearly return on the bond in each year?

Machine X has a first cost of $70,000 and an operating cost of $21,000 in year 1, increasing by $500 per year through year 5 with a salvage value of $13,000. Machine Y has a first cost of $62,000 and an operating cost of $21,000 in year 1, increasing by 3% per year through year 10 with a salvage value of $2000. If the interest rate is i =18% per year, evaluate which machine must you choose on the basis of:( with the steps)

(a) the present worth analysis,

(b) the conventional B/C analysis

Harry has just opened a Registered Retirement Savings Plan (RRSP) with his bank and is wondering, which of the following statements is correct with respect to RRSP contributions?

a.Contributions made during the current year and within 30 days of the end of the current year, must be deducted in the current year.

b. There is no penalty for making contributions that are in excess of available deduction room.

c. Contributions made during the current year can be deducted in any subsequent year.

d. Contributions in excess of available deduction room cannot be deducted in the current year or in any subsequent year.