Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Basic Finance Expert

Caravan Gaming Company is interested in developing a new facility in Brazil. The company estimates that the project would require an initial investment of $31 million. The company expects that the project will produce positive cash flows of $5,050,000 a year at the end of each of the next 15 years. The project's cost of capital is 14%.

a. find out the expected net present value of the project.

b. The company recognizes that the cash flows may be much higher or lower, depending on whether the host government imposes a large facility tax. One year from now, the company will know whether the tax will be imposed. There is a 45 percent chance that the tax will the imposed, in which case the yearly cash flows will be only $4.5 million and there is a 55 percent chance that the tax will not be imposed, in which case the yearly cash flows will be $5.5 million. If the company waits a year to start the project, the initial investment will remain at $31 million, and incoming cashflows will be delayed one year. Using decision tree analysis, find out the value of the real option to wait a year before deciding. Use a discount rate of 14 percent

c. Discuss 2-3 other factors that the company should consider in making a decision to go ahead with the project now or wait for one year.

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M942953

Have any Question? 


Related Questions in Basic Finance

Ginger created an ilit and transferred a life insurance

Ginger created an ILIT and transferred a life insurance policy and rental property to the trust. She named her husband Alfred and her children the beneficiaries of the trust. The income from the property is sufficient to ...

Brian and michelle are married and file a joint tax return

Brian and Michelle are married and file a joint tax return. For 2015, their modified AGI was $50,000. Michelle has a bachelor's degree in history. She wants to become a nurse and is attending community college to earn he ...

What is the excess burden of taxation why is there an

What is the excess burden of taxation? why is there an excess burden, and what factors affect the size of the excess burden for a specific tax? if several goods are to be tax, how should the taxes be distributed to minim ...

Following the end of world war ii in 1945 the reichsmark

Following the end of World War II in 1945, the Reichsmark, the German currency, lost so much value that a barter economy arose. During this period, many Germans used U.S. cigarettes as currency. Why might cigarettes, rat ...

1 what can researchers do to minimize error variance2

1. What can researchers do to minimize error variance? 2. Discuss the trade-off between internal and external validity. Which is more important? Explain.

Create predictions about the relationships between

Create predictions about the relationships between behavioral variables that interest you. For each relationship that you develop, indicate how the prediction could be tested using a descriptive, a correlational, and/or ...

1 explain the differences between a cmo and a mortgage

1. Explain the differences between a CMO and a mortgage pass-through type of security. 2. Define a mortgage purchase "for portfolio." 3. Discuss the purpose and operation of Ginnie Mae. 4. What would be the price of a $1 ...

1 how has the community development block grant served to

1. How has the Community Development Block Grant served to help communities perform local mitigation? 2. Why do some people consider insurance to not be a proper mitigation method? 3. Why are structural controls a contro ...

Choose a theory presented in a self-help bookinvestigate

Choose a theory presented in a self-help book. Investigate whether the theory is supported by science or is an example of pseudoscience.

The suboptimal glass company uses a process of capital

The Suboptimal Glass Company uses a process of capital rationing in its decision making. The firm's cost of capital is 10 percent. It will only invest $77,000 this year. It has determined the internal rate of return for ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro

Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen