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

Suppose a us firm buys 300000 worth of textiles from a

Suppose a U.S. firm buys $300,000 worth of textiles from a Peruvian manufacturer for delivery in 60 days with payment to be made in 90 days (30 days after the goods are received). The rising U.S. deficit has caused the d ...

Jallouk corporation has two different bonds currently

Jallouk Corporation has two different bonds currently outstanding. Bond M has a face value of $60,000 and matures in 20 years. The bond makes no payments for the first six years, then pays $2,700 every six months over th ...

First cost 1160000salvage value35000life 5 yearsusing

First Cost = $1,160,000 Salvage Value=$35,000 Life= 5 Years. Using Sum-of-the-years (SOYD) depreciation method, develop a depreciation schedule for this asset.

Exquisite fashion limited expects its sales to increase 20

Exquisite Fashion Limited expects its sales to increase 20% next year from its current level of $4.7 million. The company has current assets of $660,000, net fixed assets of $1.5 million, and current liabilities of $462, ...

Describe what tax considerations might cause you to set up

Describe what tax considerations might cause you to set up a proprietorship or a partnership rather than a corporation when you start a business. Use a real business to explain your decision.

The valhalla corporation needs to raise 64 million to

The Valhalla Corporation needs to raise $64 million to finance its expansion into new markets. The company will sell new shares of equity via a general cash offering to raise the needed funds. The offer price is $40 per ...

An apartment building in your neighborhood is for sale for

An apartment building in your neighborhood is for sale for $140,000. The building has four units, which are rented at $500 per month each. The tenants have long-term leases that expire in 5 years. Maintenance and other e ...

Yoursquore trying to determine whether or not to expand

You’re trying to determine whether or not to expand your business by building a new manufacturing plant. The plant has an installation cost of $21.4 million, which will be depreciated straight-line to zero over its four- ...

The norris co has an improved version of its hotel stand

The Norris Co. has an improved version of its hotel stand. The investment cost is expected to be $72 million and will return $13.5 million for 5 years in net cash flows. The ratio of debt to equity is 1 to 1. The cost of ...

A explain the impact on the offering yield of adding a call

A) Explain the impact on the offering yield of adding a call feature to a proposed bond issue. B) Explain the impact on the bond's expected life of adding a call feature to a proposed bond issue. C) Describe one advantag ...

  • 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