A čompany is planning to install wind power plant for running its factory located in the middle east. The board of directors are given the following two recommendations to purchase wind turbines by the finance team. A. Invest $ 150,000 now as one payment. B. Pay an equal yearly amount of $25,000 for the next 12 years at an interest rate of 15%. Which recommendation should be considered by the company management, based on present worth analysis? Option A Option B None of them

A čompany is planning to install wind power plant for running its factory located in the middle east. The board of directors are given the following two recommendations to purchase wind turbines by the finance team. A. Invest $ 150,000 now as one payment. B. Pay an equal yearly amount of $25,000 for the next 12 years at an interest rate of 15%. Which recommendation should be considered by the company management, based on present worth analysis? Option A Option B None of them

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Pak China Railroad reported net income of $770 millionafter interest expenses of $320 million in a recentfinancial year. (The corporate tax rate was 36%.) It reporteddepreciation of $960 million in that year, and capitalspending was $1.2 billion. The firm also had $4 billionin debt outstanding on the books, was rated AA (carryinga yield to maturity of 8%), and was trading at par(up from $3.8 billion at the end of the previous year).The beta of the stock is 1.05, and there were 200 millionshares outstanding (trading at $60 per share), witha book value of $5 billion. Union Pacific paid 40% of itsearnings as dividends and working capital requirementsare negligible. (The Treasury bond rate is 7%.)
Alset Inc. is considering manufacturing and selling high-end electric automobiles for the next four years. It hired two research and development teams. Team #1: This team believes that it would be realistic to sell 16 cars for $295,000 after-tax profit per car (i.e., operating cash flow per car). The R&D team also estimates $14.1 million in required initial investment. A 13 percent annual rate of return would be appropriate for discounting all future cash flows. a. Calculate the Net Present Value of this project according to Team #1. (Let's call it the "base-case Net Present Value".) (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.) b. Team #2: This team has done a more sophisticated analysis, which may potentially greatly affect the project's revised Net Present Value! The project goes as planned for four years…
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BOND PROBLEM: $1675 bond matures in 16.5 years. Coupon rate 3.39%. Payment made biweekly. R= 4.89%. After 5 -years coupon rate becomes 22% and payment made weekly. R=13%. What is your RATE OF RETURN over the years (ROR)?
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