Ask Question, Ask an Expert

+61-413 786 465

info@mywordsolution.com

Ask Financial Management Expert

problem: The Tiger Company has an opportunity to make an investment with the following estimated after tax cash flows:

Year                    ATCE
0                         -10,000,000
1                          2,000,000
2                          2,000,000
3                          2,500,000
4                          3,500,000
5                          600,000
6                          5,000,000

The company’s required rate of return on such investments id 10%.

(A) find out payback period, internal rate of return (IRR), net present value (NPV), and profitability index (PI) for this investment?

(B) What is the IRR, and what is its relationship to the NPV and the PI?

(C) Which of the two approaches present value or future value does a financial manager rely on most often? Why?

problem: Two mutually exclusive projects have projected cash flows as follows:

Years    Project A    Project B
0          -800           -800
1          400             0
2          400             0
3          400            1324

(a) Compute the net present value of each project at a discount rate of 10%.

(b) Compute the internal rate of return for each project.

(c) Graphically illustrate the present value profile of the two projects.

(d) Which project would you select? Why? What assumptions are inherent in your decision?

problem: The Buccaneer Corporation is considering replacement of its old, fully depreciated computer. Two new models are available. Computer A has a cost of $108,300 a five years expected life, and after tax cash flows (labor savings) of $29,100 per year. Computer B has a cost of $172,000, a ten-year life, and after tax cash flows of $31,700 per year. No new technological developments are expected, but computer prices are falling because of competition from imports. In five years, computer prices are expected to be 25% less than current prices. The cost of capital is 12%. If the replacement is to be made, it must be done now. Should the company make the replacement, and if so, with A or B? Why?

(i) Draw cash flow time lines for Computer A and Computer B.

(ii) find out the NPV’s on Computer A and Computer B.

(iii) On the basis of their respective NPV’s should the company invest in Computer A or Computer B?

(iv) Is there anything that you can identify that may cause some difficulty in making this decision based on the Internal Rates of Return (IRR’S0.

problem: On completion of MBA, Eddie and Mike were so pleased with the amount of useful and interesting knowledge that they had learned that they convinced some friends who are wealthy alums to create a scholarship. The scholarship will allow three needy students to take the courses in perpetuity. The annual cost of tuition and books for the course is $2000. The university will earn 6% on the fund. The scholarship will be created by a single payment to the university from their friends.

A) How large must the payment be to fund the scholarship?

B) What amount would be needed if the university could earn 9% rather than 6% per year on the funds?

problem: The Bulldog Company can purchase a Tractor for a $14,000 initial investment. The tractor will generate annual after-tax cash inflows of $4, 000 for the next 4 years.

A) What is the Net Present Value (NPV) of the asset if the company’s required rate of return on such assets is 10%?

B) What would the maximum required rate of return (closet whole-percentage rate) that the firm can have and still accept the asset?

Discuss this finding in light of your response to A. above.

Financial Management, Finance

  • Category:- Financial Management
  • Reference No.:- M9200
  • Price:- $35

Priced at Now at $35, Verified Solution

Have any Question? 


Related Questions in Financial Management

Conduct some research related to leasingwhat are the

Conduct some research related to leasing. What are the benefits to leasing as opposed to purchasing? What impact does leasing have on taxes? In the Kingdom of Saudi Arabia, are healthcare organizations more likely to lea ...

Question spirituality is a fundamental and universal

Question : Spirituality is a fundamental and universal aspect of human existence and is a critical component in working with clients, groups, communities, etc. There is a vast diversity in spiritual beliefs and religious ...

Case 1 hedging currency risks at aifsinstructionsplease

Case 1: Hedging Currency Risks at AIFS Instructions: Please download the case and accompanying material from the HBS link that I provided on Canvas. For your analysis of the case, I am asking you put yourself in the shoe ...

1 analyze marketing opportunities using environmental

1. Analyze marketing opportunities using environmental scanning market data, measurement, and analysis. 2. Explain issues pertaining to marketing environment both internally and externally 3. Demonstrate an understanding ...

Understanding the health care reform acthow has the patient

Understanding the Health Care Reform Act How has the Patient and Affordable Care Act of 2010 (the "Health Care Reform Act") reshaped financial arrangements between hospitals, physicians, and other providers with Medicare ...

Time value 21 gronkrobkowski has asked your help in

Time Value 2 1. GronkRobkowski has asked your help in deciding between two contract offers made by the Patriots.  The first is a four year contract with a $10 M signing bonus today, and salaries starting next year for $1 ...

International business letterabout frac34 of a page to one

International business Letter About ¾ of a page to one full page business letter (formatting as researched culture may dictate) + several paragraphs of rationale One of the great things about entering a field under the s ...

Qestionsforecast 2019 revenue column m by estimating the

Questions: Forecast 2019 revenue (Column M) by estimating the % growth drivers (Column R). Forecast 2019 expenses (Column M) by estimating the expense as % of revenue drivers (Column X). Write your rationale for each ass ...

Questions 1 when can there arise a conflict between

Questions 1. When can there arise a conflict between shareholders and managers goals? How does wealth maximization goal take care of this conflict? 2. A company has just tested the market for a new product. The test indi ...

Materialinstruments with various measurement scales

Material Instruments with Various Measurement Scales Worksheet Describe in no more than 350 words a business situation of your choice where market research can influence decision making. Create six questions for a questi ...

  • 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

Why might a bank avoid the use of interest rate swaps even

Why might a bank avoid the use of interest rate swaps, even when the institution is exposed to significant interest rate

Describe the difference between zero coupon bonds and

Describe the difference between zero coupon bonds and coupon bonds. Under what conditions will a coupon bond sell at a p

Compute the present value of an annuity of 880 per year

Compute the present value of an annuity of $ 880 per year for 16 years, given a discount rate of 6 percent per annum. As

Compute the present value of an 1150 payment made in ten

Compute the present value of an $1,150 payment made in ten years when the discount rate is 12 percent. (Do not round int

Compute the present value of an annuity of 699 per year

Compute the present value of an annuity of $ 699 per year for 19 years, given a discount rate of 6 percent per annum. As