Ask Question, Ask an Expert

+1-415-315-9853

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

Daw payoff diagrams for each of the positions below x

Draw payoff diagrams for each of the positions below (X = strike price). a. Buy a call, with X = $50 b. Sell a call, with X = $60 c. Buy a put, with X = $60 d. Sell a put, with X = $50

A the following table shows the price of 1000 face value

A. The following table shows the price of $1000 face value 1-year, 2-year, 3-year, 9-year and 10-year US Treasury zero coupon bonds as of Oct. 17, 2016. Use pure expectations hypothesis to determine: a. the expected inte ...

1 money that has been or will be paid regardless of the

1. Money that has been or will be paid regardless of the decision whether or not to proceed with the project is: A) cannibalization. B) considered as part of the initial investment in the project. C) an opportunity cost. ...

Sun bank usa has purchased a 8 million one-year australian

Sun Bank USA has purchased a 8 million one-year Australian dollar loan that pays 16 percent interest annually. The spot rate of U.S. dollars for Australian dollars is $0.6250/A$1. It has funded this loan by accepting a B ...

Quad enterprises is considering a new three-year expansion

Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.58 million. The fixed asset falls into the three-year MACRS class. The project is estimated to gene ...

Stumped by a homework questionat what point would an

Stumped by a homework question. At what point would an investor be indifferent between a Bridgford corporate bond yielding 8.0 percent and a tax-free municipal bond of equal financial strength if the investor's marginal ...

Optimal capital structure with hamada beckman engineering

Optimal Capital Structure with Hamada Beckman Engineering and Associates (BEA) is considering a change in its capital structure. BEA currently has $20 million in debt carrying a rate of 6%, and its stock price is $40 per ...

Suppose that the 3 month and 6 month continuously

Suppose that the 3 month and 6 month continuously compounded LIBOR rates are 3% and 3.5% respectively. Assume that LIBOR is used as the risk-free discount rate. a) What is the value of an FRA under which 4% is paid and L ...

1 a company currently pays a dividend of 1 per share d0 1

1. A company currently pays a dividend of $1 per share (D0 = $1). It is estimated that the company's dividend will grow at a rate of 17% per year for the next 2 years, then at a constant rate of 6% thereafter. The compan ...

In which statement of cash flows section would you most

In which Statement of Cash Flows section would you most likely find information about a firm’s capital structure strategy? Cash Flows from Investing Cash Flows from Financing No evidence in the Statement of Cash Flows Ca ...

  • 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

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

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