Managers of CVS Pharmacy are considering a new project. This project would be a new store in Odessa, Texas. They estimate the following expected net cash flows if the project is adopted.
Year 0: ($1,250,000)
Year 1: $200,000
Year 2: $500,000
Year 3: $400,000
Year 4: $300,000
Year 5: $200,000
Suppose that the appropriate discount rate for this project is 5.2%, compounded annually.
Calculate the net present value for this proposed project.
Do not round at intermediate steps in your calculation. Round your answer to the nearest dollar. If the NPV is negative, include a minus sign. Do not type the $ symbol.
In: Finance
A proposed new investment has projected sales of 15,000 units in year 1 and 20,000 units in year 2. The sales price for both years will be $10 per unit. The project will terminate after the second year. Variable costs are expected to be 50% of sales. Fixed costs will be $25,000 per year. The investment will cost $20,000 and will be depreciated straight line to $0 over the 2 year period. The tax rate is 34% for both years and the investment will be worthless after 2 years. Please prepare projected income statements for each of the 2 years and calculate the operating cash flow for each year.
In: Accounting
Vandezande Inc. is considering the acquisition of a new machine that costs $435,000 and has a useful life of 5 years with no salvage value. The incremental net operating income and incremental net cash flows that would be produced by the machine are (Ignore income taxes.):
| Incremental Net Operating Income | Incremental Net Cash Flows | |||||
| Year 1 | $ | 76,000 | $ | 155,000 | ||
| Year 2 | $ | 82,000 | $ | 161,000 | ||
| Year 3 | $ | 93,000 | $ | 175,000 | ||
| Year 4 | $ | 56,000 | $ | 158,000 | ||
| Year 5 | $ | 98,000 | $ | 160,000 | ||
Assume cash flows occur uniformly throughout a year except for the initial investment.
The payback period of this investment is closest to:
In: Accounting
Assume that the population of a town obeys Malthusian growth. Assume that the size of the population was 2000 in year 1900, and 50 000 in year 1950.
(a) Find the value of the growth constant k.
(b) How long does it take for the population to grow by 20%?
(c) How big was the population in year 2000?
(d) What was the rate of change of the population in year
2000?
(e) Calculate the size of the population in year 2001, and from
that the actual change in population during the one year, from 2000
to 2001.
(f) Explain why the two values calculated in (d) and (e) above do
not necessarily have to be the same.
In: Statistics and Probability
What is profitability Index? Given the discount rates and the future cash flows of each project, which project should they accept using Profitability Index?
|
Cash Flows |
Project A |
Project B |
Project C |
Project D |
|
Year Zero |
- $ 1,500,000 |
- $ 1,500,000 |
- $ 2,000,000 |
- $ 2,000,000 |
|
Year One |
$ 350,000 |
$ 400,000 |
$ 700,000 |
$ 200,000 |
|
Year Two |
$ 350,000 |
$ 400,000 |
$ 600,000 |
$ 400,000 |
|
Year Three |
$ 350,000 |
$ 400,000 |
$ 500,000 |
$ 600,000 |
|
Year Four |
$ 350,000 |
$ 400,000 |
$ 400,000 |
$ 800,000 |
|
Year Five |
$ 350,000 |
$ 400,000 |
$ 300,000 |
$ 1,000,000 |
|
Discount Rate |
4% |
8% |
13% |
18% |
In: Mechanical Engineering
At the beginning of the year, you buy 800 shares in Muleshoe Mutual Fund, which currently has a NAV of $48.10. The fund has a front-end load of 1.8%. Over the year, the fund distributed capital gains of $1.75 per share and dividend distributions of $1.42. At the end of the year, the NAV was at $54.47 and the offer price was at $55.45.
A. If you sell after one year, what is your HPR?
B. Recalculate your HPR, assuming you bought 800 shares at the beginning of the year, reinvested all your distributions at an average price of $51, and sold your shares at the end of the year.
In: Finance
Solo Corp. is evaluating a project with the following cash flows:
Year 0 Cash Flow –$ 28,900
Year 1 Cash Flow $11,100
Year 2 Cash Flow $13,800
Year 3 Cash Flow $15,700
Year 4 Cash Flow $12,800
Year 5 Cash Flow $– 9,300
The company uses a discount rate of 13 percent and a reinvestment rate of 6 percent on all of its projects.
a.)Calculate the MIRR of the project using the discounting approach.
b.) Calculate the MIRR of the project using the reinvestment approach.
c.) Calculate the MIRR of the project using the combination approach.
In: Finance
6. Assume the annual interest rate on a $500,000 7-year balloon mortgage is 6 percent. Payments will be made monthly based on a 30-year amortization schedule.
f. What will be the remaining mortgage balance on the new 4.5 percent loan at the end of year 7 (four years after refinancing)?
g. What will be the difference in the remaining mortgage balances at the end of year 7 (four years after refinancing)?
h. At the end of year 3 (beginning of year 4), what will be the present value of the difference in monthly payments in years 4–7, discounting at an annual rate of 4.5 percent?
In: Economics
Prices of several bonds are given below:
*Half
|
Bond Principal($) |
Time to maturity(years) |
Annual coupon*($) |
Bond price($) |
| 100 | 0.5 | 0 | 98.9 |
| 100 | 1 | 0 | 97.5 |
| 100 | 1.5 | 4 | 101.6 |
| 100 | 2 | 4 | 101.9 |
the stated coupon is assumed to be paid semiannually.
(a) Use the bootstrap method to find the 0.5-year, 1-year, 1.5-year
and 2-year zero rates per annum with continuous compounding.
(b) What is the continuously compounded forward rate for the period
between the 1-year point and the 2-year point?
In: Finance
The management of Electronics Company is considering to purchase an equipment to be attached with the main manufacturing machine. The equipment will cost $8,000. The useful life of the equipment is 4 years. Management projected that annual cash inflow for four(4) years as follow: year-1 $1,000, year-2 $3000, year-3 $3500 and year-4 $4000. There’s maintenance cost for the equipment, and management should expense: $600 on year-2 and $800 on year-4. The management wants a 14% return on all investments. a. Compute net present value (NPV) of this investment. b. Should the equipment be purchased according to NPV analysis?
In: Economics