Assume that the net cash flow of a potential $7.25 million investment is $1.1 million in year 1, then $1.25 million in year 2, $1.4 million in year 3, $2.2 million in year 4 and year 5, and then sold at the end of year 5 for $850,000. Further assume that in each year cash flows (excluding initial investment) could be as much as $400,000 less than forecast, or $400,000 more than forecast. Suppose you assess the “low net cash flow” probability at 25 percent likely, the base (original) scenario at 50 percent likely, and the “high net cash flow” probability at 25 percent. The corporate cost of capital is 9 percent.
1. What is the worst case NPV? $ _____
- What is the best case NPV? $_____
-What is the expected NPV on the basis of the scenario analysis? $_______
In: Finance
The following data were taken from the financial statements of Hunter Inc. for December 31 of two recent years:
| Current Year | Previous Year | |||
| Accounts payable | $95,000 | $144,000 | ||
| Current maturities of serial bonds payable | 200,000 | 200,000 | ||
| Serial bonds payable, 10% | 1,010,000 | 1,210,000 | ||
| Common stock, $1 par value | 60,000 | 60,000 | ||
| Paid-in capital in excess of par | 570,000 | 580,000 | ||
| Retained earnings | 1,980,000 | 1,580,000 | ||
The income before income tax was $447,700 and $391,700 for the current and previous years, respectively.
a. Determine the ratio of liabilities to stockholders' equity at the end of each year. Round to one decimal place.
| Current year | |
| Previous year |
b. Determine the times interest earned ratio for both years. Round to one decimal place.
| Current year | |
| Previous year |
In: Accounting
"A company is considering entering into a new marketing campaign. If it engages in this marketing campaign, it must pay $10,000 immediately and $8,000 each at the end of year 1 and year 2. The company believes its annual revenues due to the marketing campaign will be $12,000 at the end of year 1, $10,000 at the end of year 2, and $7,000 at the end of year 3. What is the annual equivalent worth of this marketing campaign over the next three years? The interest rate is 5.5% compounded annually."
In: Finance
Finally, assume you currently have $200,000 that you are ready to invest for retirement. In addition, you plan to save
In: Finance
Classic Manufacturers invests $200,000 in a piece of equipment. The company’s management has estimated that the equipment will generate revenue of $50,000 in Year 1, $60,000 in Year 2, and $80,000 in Year 3 to Year 5. At the end of Year 5 the equipment will have zero salvage value. Given that the company depreciates the equipment on a straight-line basis and that there are no other revenues and expenses, the average accounting rate of return is closest to:
| A. |
70% |
|
| B. |
25% |
|
| C. |
30% |
|
| D. |
75% |
In: Finance
At the beginning of the current year, Trenton Company's total assets were 258,000 and its total liabilities were 180,000 during the year the company reported total revenues of 103,000, total expenses of 81,000 and dividends of 10,000. There were no other changes in equity during the year and total assets at the end of the year were 270,000. Trenton Company's debt ratio at the end of the current year is. A 50.0%. B 1.50%. C 66.7% D 33.3% E 69.8%
In: Accounting
An insurance company has written two life insurance policies for a husband and wife. Policy 1 pays $10,000 to their children if both husband and wife die during this year. Policy 2 pays $100,000 to the surviving spouse if either husband or wife dies during this year. The probability that the husband will die this year is .011. The probability that the wife will die this year is .008. Find the probability that each policy will pay a benefit this year. Assume that the deaths of husband and wife are independent
In: Statistics and Probability
Answer the following questions and draw the cash flow diagrams for each:
(a) What are the equivalent annual payments over a 15-year period for a present value of $14,500 and a compound interest rate of 6% per year.
(b) What are the annual equivalent payments for a present value of $445,000 in perpetuity and a compound interest rate of 6% per year.
(c) What is the present worth of $15,000/year for 30 years at a compound interest rate of 6% per year?
In: Finance
Compute the missing amount for each of the following separate companies in columns B through E. (Losses and amounts to be deducted should be indicated with a minus sign.)
|
|
CBS |
ABC |
CNN |
|
|
Equity, beginning of year |
$0 |
$0 |
$0 |
$0 |
|
Owner investments during the year |
110,000 |
98,560 |
220,736 |
|
|
Dividends during the year |
(54,000) |
(9,000) |
(54,000) |
|
|
Net income (loss) for the year |
106,000 |
54,640 |
(5,000) |
|
|
Equity, end of year |
$112,000 |
$108,640 |
$120,736 |
In: Accounting
I am needing the following questions answered based on General Motors Company (GM), using the 2019 fiscal year
19. What investing activity provided the largest inflow of cash in the current year?
20. What investing activity used the largest amount of cash in the current year?
21. What financing activity provided the largest inflow of cash in the current year?
22. What financing activity used the largest amount of cash in the current year?
In: Accounting