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

Write a 700-word report in which you address the

Write a 700-word report in which you address the following: Define and explain the role of ethics and social responsibility in developing a strategic plan while considering stakeholder needs and agendas. Include at least ...

Please respond to the followinga justify whether the

Please respond to the following: a) Justify whether the standard deviation or covariance is the most significant measurement when adding a risky asset to an already highly risky portfolio. Provide support for your justif ...

Assignmentthe purpose of this assignment is to allow you

Assignment The purpose of this assignment is to allow you the chance to evaluate the role of social responsibility in society. After you complete this assignment, you will analyze a written article, be able to ascertain ...

The investment logic for sustainabilitywatch the investment

The Investment Logic for Sustainability Watch the Investment Logic for Sustainability video. Then perform a few internet searches on terms such as the following: Sustainable funds Socially responsible investing ESG Envir ...

Guidelines for forecasting work in ceres gardening casethe

Guidelines for forecasting work in Ceres Gardening Case The analysis of Ceres Gardening should focus on forecasting the Income Statement, Balance Sheet and Statement of Cash Flows for years 2007-2009, as indicated on the ...

Assignmentdescribe a work task a hobby or another activity

Assignment Describe a work task, a hobby, or another activity that you regularly do, and sequentially list the various actionsyou take in orderto complete this activity. Consider thecomplexity of your list and the amount ...

Company overviewintroductory paragraph summarize the

Company Overview Introductory paragraph. Summarize the section in 1 - 2 paragraphs including the history, current market, and the overall image of the organization. History Current Market Include a brief 2 - 3 paragraph ...

Discuss one or a few of the basic concepts of capital

Discuss one (or a few) of the basic concepts of capital budgeting such as independent vs. mutually exclusive, capital rationing, sunk costs, opportunity costs, cash flow patterns, etc. Why are they important for the inve ...

Portfolio projectexotic food inc capital budgeting casecase

Portfolio Project: Exotic Food Inc., Capital Budgeting Case CASE SUMMARY Exotic Food Inc., a food processing company located in Herndon, VA, is considering adding a new division to produce fresh ginger juice. Following t ...

Reflection papernbsp instructionsas you continue on your

Reflection Paper  : Instructions As you continue on your quest for academic success, it is important to share your knowledge with others. In fact, you have been asked to provide advice to future students on academic inte ...

  • 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