A company wants to purchase a piece of equipment in three years that will cost $28,000 according to their best estimates. What amount do they need to invest now in a 6% interest bearing account to be able to make that purchase?
In: Finance
The spot price of oil is $50 per barrel and the cost of storing a barrel of oil for one year is $3, payable at the end of one year. The risk-free interest rate is 5% per annum with annual compounding. According to the one-year forward price on oil in the market, the convenience benefit of carrying a barrel of oil for one year is estimated to be $2 in terms of the value at the end of one year. This implies that the one-year forward price on oil is $__________ in the market.?
In: Finance
A company owns common stocks with a beta coefficient of 1.2. If the cost of equity is 13% and the expected market return is 11% what is the risk-free rate?
In: Finance
The JLK Corporation is considering an investment that will cost
RM80,000 and
have a useful life of 4 years. During the first 2 years, the net
incremental after-tax
cash flows are RM25,000 per year and for the last two years they
are RM20,000
per year. Calculate the payback period for this investment.
In: Finance
The Sausage Hut is looking at a new sausage system with an equipment cost of $450,000. This cost will be depreciated straight-line to zero over the project's 5-year life, at the end of which the sausage system can be sold at a salvage value of $80,000. The sausage system is estimated to generate $250,000 in annual sales, with COGS and administrative expenses of $72,000. The system requires an initial investment in net working capital of $30,000, which will be recouped at project end. If the tax rate is 35 percent and the required return is 10 percent, what is the NPV of this project?
0 | 1 | 2 | 3 | 4 | 5 | |
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ΔNWC | ||||||
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CFFA |
In: Finance
A borrower finds that the incremental cost of borrowing an extra $10,000 in a first mortgage loan is 14%. A second mortgage loan can be obtained at 15% in combination with a smaller (by $10,000) first mortgage. The borrower would be better off by borrowing with the combination of the smaller first mortgagee loan and a second mortgage loan for $10,000.
Group of answer choices
True
False
In: Finance
In: Finance
In: Finance
Alpha Industries is considering a project with an initial cost of $8.1 million. The project will produce cash inflows of $1.46 million per year for 9 years. The project has the same risk as the firm. the firm has a pretax cost of debt of 5.64% and a cost of equity of 11.29%. The debt-equity ratio is .61 and the tax rate is 39 percent.
A. Should the Firm accept the project?
B.Calculate the Firms WACC
In: Finance
A firm and its supplier are going to negotiate a deal. Since the supplier’s cost is $10 million per quarter and the value to the firm is $14 million per quarter, there is $4 million per quarter to split between the two. However, they can each hire a negotiation consultant for $500,000 per negotiation. If neither hires the consultant, each expects to get half of the $4 million pot. If only one hires the consultant, it expects to get three-fourths of the pot minus the consultant costs. If they both hire consultants, they cancel each other out and they expect to get half the pot minus the consulting costs. What is the equilibrium of this simultaneous move game?
In: Economics