a. What is each project's NPV? Negative values, if any, should be indicated by a minus sign. Do not round intermediate calculat answers to the nearest cent. Project A: $ Project B: $ b. What is each project's IRR? Do not round intermediate calculations. Round your answers to two decimal places. Project A: % Project B:
Q: = the maximum yield rate the investor can earn?
A: Bond price refers to the present discounted value of the future cash stream which is generated by…
Q: You have $100,000 to invest. You choose to put $150,000 into the market by borrowing $50,000. a. If…
A: Investment means engaging your funds to generate income for the future. Return means amount earned…
Q: 9. Of the three acceptable methods of valuation, which would you recommend for determining the value…
A: The expected rental revenue can be estimated at first using comparable properties in the area. An…
Q: There are six laws that regulate consumer credit in the United States. The one that protects credit…
A: The Correct option is 'a. Fair Credit Reporting Act'.
Q: Tricana Corporation borrowed $75,000.00 at 3% compounded monthly for 14 years to buy a warehouse.…
A: Borrowed amount is $75,000.00 Interest rate is 3% compounded monthly Time period is 14 years To…
Q: Public Islamic Bank Bhd with excess fund of MYR9,000,000 decided to place Islamic Negotiable…
A: We will take the dividend at @10.5%. The amount received at the end of the year will be the sum of…
Q: What is the NOI of an industrial building of 50,000 SF with monthly rents of $1.00 per SF on an NNN…
A: NOI is net operating income before tax but after deductions of operating expenses. NOI is very…
Q: Develop scenarios where a project manager has to cope with pressures from stakeholders with respect…
A: Every project has a budget and a timeline attached to it. Everything runs smoothly, on time, and…
Q: is eslimated ata certain pece of egment cansave 000 per yearin lator and matea coss. The equpment…
A: Data given: Annual savings = $28000 Useful life = 5 years Salvage value = nil Annual return…
Q: The current ratio of a company is 6:1 and its acid-test ratio is 1:1. If the inventories and prepaid…
A: Current Liabilities: These are liabilities that are due in less than a year and are expected to pay…
Q: A lease valued at $22,000 requires payments of $1,629 at the beginning of every three months. If…
A: Firstly we need to calculate number of payments for lease by using NPER function in excel.…
Q: Sugar Sweet (SS) Company produces and sells 7,000 specialty Treats per year at a selling price of…
A: (Note: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the…
Q: .Galaxy Corporation is expected to pay a dividend of $1.40 per share at the end of this year and…
A: Stock Price refers to the current value of all the expected dividend that an investor can receive…
Q: The next dividend for the Ali Baba company will be $6 per share. Investors require a 19 per cent…
A: Next dividend (D1) = $6 Required return (r) = 19% Growth rate (g) = 9% Period from now for valuation…
Q: I ONLY NEED #2 Solved. Questions 1 and 2 are connected, I only need #2 The rights to Michael…
A: 2. Year 1 2 3 4 5 Annual Casl Flow $ 3,50,000.00 $ 3,80,000 $…
Q: hat will be the price of these bonds if they receive either an A or a AA rating?
A: Bond: It is a debt instrument issued by a company (issuer) for raising capital. The issuer pays the…
Q: TRADE NUMBER RANDOM PRICE CHANGE STOCK PRICE NUMBER 1 45 +3/8 +1/8 +1/8 +1/2 2 95 3 72 4 69 99 53 7…
A: Trade number Random Number Price change 1 45 0 2 95 0.375 3 72 0.125 4 69 0.125 5 99 0.5…
Q: You buy 100 shares of stock for $50 per share. The stock pays a dividend of $2 per share per year.…
A: Data given: Purchase price (P0)= $50 per share Dividend per share per year = $2 i.e., D1=$2, D2= $2…
Q: If a coupon bond that is going to mature in two years is selling at par. Suppose its coupon rate is…
A: Given, Coupon payment is $100 Yield to maturity at beginning is 10% Yield to maturity at end is 5%…
Q: Paul plans to contribute $200 at the start of every quarter year to an investment that earns 7 25%…
A: Contribution per Quater is $200 Time period is (55-20) = 35 years Interest rate is 7.25% Compounded…
Q: Assume the following characteristics of à bónd: Seling at 96.000, 2.3% coupon, annual pay, 12 years…
A: Selling Price of Bond is 96.000 Coupon rate is 2.5% Time to Maturity is 12 years Face Value of Bond…
Q: Suppose the risk-free return is 3.5% and the market portfolio has an expected return of 11.9% and a…
A: a) Beta with respect to market: = (Volatility of Security * Correlation of security with market)/…
Q: Your sister has been offered a 5-year bond with a P1,000 par value and a 7 percent coupon rate. This…
A: Given: Years = 5 Face value = P1,000 Coupon rate = 7% Rate = 9%
Q: FRANCORP is preparing budgets for the quarter ending March 31. Budgeted sales for the next 5 months…
A: Financial budgets ae prepared by corporate entities for making financial plans and policies for the…
Q: ind pays no dividends. One year from now, there is a 50% (risk-neutral) probability that the stock…
A: European call can be exercised only on expiration unlike American call that can be exercised any…
Q: You have $100 a month you can deposit into an account earning 3.9% APR, compounded monthly. How long…
A: Given that: Accumulated Value (A)=$10000 Principal amount (P)=$100 Interest rate (R)=3.9%=0.039 t=?…
Q: What is the payback period for the new machine
A: Payback Period: It is the period in which the initial outlay of an investment or equipment is…
Q: . M acquired a small lot in a subdivision, paying P20,000 down and pledge to pay P1,500 every 3…
A: Here, Down Payment is P20,000 Quarterly Payment (PMT) is P1,500 Time Period (n) is 10 years Interest…
Q: Modigliani & Miller show that dividend policy can also be considered irrelevant. Yet, unexpected…
A: Dividends: Dividends are cash flows that a company pays its common stockholders. Unlike preferred…
Q: Thangmo Company is a large manufacturing firm in Cherating that was created 20 years ago by the…
A: The bond interest rates are expected to go up as the bonds are now backed up by the government…
Q: A commercial farmer wants to acquire a mechanised feed spreader that costs $80,000. He intends to…
A: Given: Initial COst = $80,000 Time = 5 years Lase payments= $19000 in advance for 5 years Salvage…
Q: We must evaluate a proposal to buy a new milling machine. The purchase price of the milling machine,…
A: Projects cash flows at year 0 will be the sum of the following Cash flows year 0 =Purchase price…
Q: Accra Brewery Company Limited agreed to supply 300 cartons of Star Beer for the 2018 Christmas…
A: Parties to the contract : Seller: Accra Brewery Company Limited Buyer: Alisa Hotels Terms of…
Q: Loudoun Trucking purchases 4,750 truck tires. The federal excise tax is $0.13 per tire. Find the…
A: Excise Tax = truck tires * Excise tax rate
Q: Questions 1. What is the Zapatoes Inc's capital structure? What is the effect of an additional debt?…
A: Capital structure is defined as the combination of the debt as well as equity, which helps in…
Q: i. Outline any FIVE (5)Principles of Finance use in the business. ii. Enter the names of the…
A: Financial management is the corporate function that deals with profit, expenses, cash, and credit in…
Q: Explain briefly any 5 of the 6 factors that differ financial services and physical goods.
A: Any tangible item purchased to fulfil needs and desires. Physical goods are more expensive than…
Q: Let's say you are a credit analyst in the asset management department of a large bank or insurance…
A: We are not allowed to use excel so the excel sheet cannot be attached but I have provided the…
Q: *You are planning to purchase your first electric car worth $65,000 right after your graduation (in…
A: A Continuous Compounded Interest rate is the interest rate that is calculated on the principal…
Q: ou expect that the index will experience a gnificant drop in the next 4 months. What would e the…
A: The option are used for hedging the current position in the market and used quite extensively to…
Q: The price of a bond with no expiration date is originally $5,000 and it pays an annual interest…
A: The bond that provides coupon payment indefinitely to the bondholder is called a perpetual bond with…
Q: You have S10,000 to invest for 90 days. Current spot rate: S1.32/£. The 90-day forward rate is…
A: Forward rate = [Spot rate * (1 + domestic interest rate) ]/ (1 + foreign interest rate).
Q: ntify the Given and the Unknown or what is being asked in the problem (b)Provide the formula to be…
A: Loans are to be paid by equal periodic payments that carry payment of principal amount and payment…
Q: You borrow money on a self liquidating installment loan (equal payments at the end of each year,…
A: Hi There, thanks for posting the question. But as per Q&A guidelines, we must answer the first…
Q: million
A: Cash flow shows the inflow and outflow of cash in a particular period of time. It signifies the…
Q: what is its equity beta?
A: Equity beta also termed as stock beta or levered beta refers to the tool or method used to determine…
Q: Consider the following information: Rate of return State of Economy Probability Stock A Stock B…
A: Thanks for posting this question but as per the guidelines in the case of multiple questions we have…
Q: SA
A: A forward currency value is the current rate of exchange for a foreign currency commercial…
Q: Harry Morgan plans to make 30 quarterly deposits of P200 into a savings account. The first deposit…
A: Solved using Financial Calculator N= 30 (7.5 * 4 = 30) I/Y = 8/4 = 2 PMT = 200 CPT FV = 8113.62
Q: Question 3a continued. The coupon rate experienced by the investor is Y percent. What is Y? 0.1…
A: The coupon rate is the annual interest rate on the bond. The capital gains yield in the capital gain…
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 2 images
- OPTIMAL CAPITAL BUDGET Hampton Manufacturing estimates that its VVACC is 125%. The company is considering the following 7 investment projects: Project Size IRR A 750,000 14.0% B 1,250,000 13.5 C 1,250,000 13.2 D 1,250,000 13.0 E 750,000 12.7 F 750,000 12.3 G 750,000 12.2 a. Assume that each of these projects is independent and that each is just as risky as the firms existing assets. Which set of projects should be accepted, and what is the firms optimal capital budget? b. Now assume that Projects C and D are mutually exclusive. Project D has an NPV of 400,000, whereas Project C has an NPV of 350,000. Which set of projects should be accepted, and what is the firms optimal capital budget? c. Ignore part b and assume that each of the projects is independent but that management decides to incorporate project risk differentials. Management judges Projects B, C, D, and E to have average risk. Project A to have high risk, and Projects F and G to have low risk. The company adds 2% to the WACC of those projects that are significantly more risky than average, and it subtracts 2% from the WACC of those projects that are substantially less risky than average. Which set of projects should be accepted, and what Is the firms optimal capital budget?OPTIMAL CAPITAL BUDGET Hampton Manufacturing estimates that its WACC is 125%. The company is considering the following seven investment projects: Project Size IRR A 750,000 14.0% B 1,250,000 13.5 C 1,250,000 13.2 D 1,250,000 13.0 E 750,000 12.7 F 750,000 12.3 G 750,000 12.2 a. Assume that each of these projects is independent and that each is just as risky as the firm's existing assets. Which set of projects should be accepted, and what is the firm's optimal capital budget? b. Now assume that Projects C and D are mutually exclusive. Project D has an NPV of 400,000, whereas Project C has an NPV of 350,000. Which set of projects should be accepted, and what is the firm's optimal capital budget? c. Ignore Part b and assume that each of the projects is independent but that management decides to incorporate project risk differentials. Management judges Projects B, C, D, and E to have average risk; Project A to have high risk; and Projects F and G to have low risk. The company adds 2% to the WACC of those projects that are significantly more risky than average, and it subtracts 2% from the WACC of those projects that are substantially less risky than average. Which set of projects should be accepted, and what is the firm's optimal capital budget?Capital rationing decision for a service company involving four proposals Clearcast Communications Inc. is considering allocating a limited amount of capital investment funds among four proposals. The amount of proposed investment, estimated income from operations, and net cash flow for each proposal are as follows: Investment Year Income from Operations Net Cash Flow Proposal A: 450,000 1 30,000 120,000 2 30,000 120,000 3 20,000 110,000 4 10,000 100,000 5 (30,000) 60,000 60,000 510,000 Proposal B: 200,000 1 60,000 100,000 2 40,000 80,000 3 20,000 60,000 4 (10,000) 30,000 5 (20,000) 20,000 90,000 290,000 Proposal C: 320,000 1 36,000 100,000 2 26,000 90,000 3 26,000 90,000 4 16,000 80,000 5 16,000 80,000 120,000 440,000 Proposal D: 540,000 1 92,000 200,000 2 72,000 180,000 3 52,000 160,000 4 12,000 120,000 5 (8,000) 100,000 220,000 760,000 The companys capital rationing policy requires a maximum cash payback period of three years. In addition, a minimum average rate of return of 12% is required on all projects. If the preceding standards are met, the net present value method and present value indexes are used to rank the remaining proposals. Instructions 1. Compute the cash payback period for each of the four proposals. 2. Giving effect to straight-line depreciation on the investments and assuming no estimated residual value, compute the average rate of return for each of the four proposals. Round to one decimal place. 3. Using the following format, summarize the results of your computations in parts (1) and (2). By placing the calculated amounts in the first two columns on the left and by placing a check mark in the appropriate column to the right, indicate which proposals should lie accepted for further analysis and which should be rejected. Proposal Cash Payback Period Average Rate of Return Accept for Further Analysis Reject A E C D 4.For the proposals accepted for further analysis in part (3), compute the net present value. Use a rate of 12% and the present value of 1 table appearing in this chapter (Exhibit 2). 5.Compute the present value index for each of the proposals in part (4). Round to two decimal places. 6.Rank the proposals from most attractive to least attractive, based on the present values of net cash flows computed in part (4). 7.Rank the proposals from most attractive to least attractive, based on the present value indexes computed in part (5). 8.Based on the analyses, comment on the relative attractiveness of the proposals ranked in parts (6) and (7).
- Capital rationing decision for a service company involving Clearcast Communications Inc. is considering allocating a limited amount of capital investment funds among four proposals. The amount of proposed investment, estimated income from operations, and net cash flow for each proposal are as follows: The company's capital rationing policy requires a maximum cash payback period of three years. In addition, a minimum average rate of return of 12% is required on all projects. If the preceding standards are met, the net present value method and present value indexes are used to rank the remaining proposals. Instructions 1. Compute the cash payback period for each of the four proposals. 2. Giving effect to straight-line depreciation on the investments and assuming no estimated residual value, compute the average rate of return for each of the four proposals. Round to one decimal place. 3. Using the following format, summarize the results of your computations in parts (1) and (2). By placing the calculated amounts in the first two columns on the left and by placing a check mark in the appropriate column to the right, indicate which proposals should be accepted for further analysis and which should be rejected. 4. For the proposals accepted for further analysis in part (3), compute the net present value. Use a rate of 12% and the present value of 1 table appearing in this chapter (Exhibit 2). 5. Compute the present value index for each of the proposals in part (4). Round to two decimal places. 6. Rank the proposals from most attractive to least attractive, based on the present values of net cash flows computed in part (4). 7. Rank the proposals from most attractive to least attractive, based on the present value indexes computed in part (5). Round to two decimal places. 8. Based on the analyses, comment on the relative attractiveness of the proposals ranked in parts (6) and (7).Capital rationing decision for a service company involving four proposals Renaissance Capital Group is considering allocating a limited amount of capital investment funds among four proposals. The amount of proposed investment, estimated income from operations, and net cash flow for each proposal are as follow: Investment Year Income from Operations Net Cash Flow Proposal A: 680,000 1 64,000 200,000 2 64,000 200,000 3 64,000 200,000 4 24,000 160,000 5 24,000 160,000 240,000 920,000 Proposal B: 320,000 1 26,000 90,000 2 26,000 90,000 3 6,000 70,000 4 6,000 70,000 5 (44,000) 20,000 20,000 340,000 Proposal C: 108,000 1 33,400 55,000 2 31,400 53,000 3 28,400 50,000 4 25,400 47,000 5 23,400 45,000 142,000 250,000 Proposal D: 400,000 1 100,000 180,000 2 100,000 180,000 3 80,000 160,000 4 20,000 100,000 5 0 80,000 300,000 700,000 The companys capital rationing policy requires a maximum cash payback period of three years. In addition, a minimum average rate of return of 12% is required on all projects. If the preceding standards are met, the net present value method and present value indexes are used to rank the remaining proposals. Instructions 1.Compute the cash payback period for each of the four proposals. 2.Giving effect to straight-line depreciation on the investments and assuming no estimated residual value, compute the average rate of return for each of the four proposals. Round to one decimal place. 3.Using the following format, summarize the results of your computations in parts (1) and (2). By placing the calculated amounts in the first two columns on the left and by placing a check mark in the appropriate column to the right, indicate which proposals should be accepted for further analysis and which should be rejected. Proposal Cash Payback Period Average Rate of Return Accept for Further Analysis Reject A B C D 4.For the proposals accepted for further analysis in part (3), compute the net present value. Use a rate of 15% and the present value of 1 table appearing in this chapter (Exhibit 2). 5.Compute the present value index for each of the proposals in part (4). Round to two decimal places. 6.Rank the proposals from most attractive to least attractive, based oil the present values of net cash flows computed in part (4). 7.Rank the proposals from most attractive to least attractive, based on the present value indexes computed in part (5). 8.Based on the analyses, comment on the relative attractiveness of the proposals ranked in parts (6) and (7).Ch. 6. Capital Budgeting with Inflation. For questions 7 and 8 use the following information. Consider the following cash flows on two mutually exclusive projects: Year Project A Project B 0 -$60,000 -$75,000 1 $38,000 $40,000 2 $36,000 $42,000 3 $29,000 $46,000 The cash flows of Project A are expressed in real terms, whereas those of Project B are expressed in nominal terms. The appropriate nominal discount rate is 12 percent and the inflation rate is 3 percent. What is the NPV for Project A?
- Ch. 6. Capital Budgeting with Inflation. For questions 7 and 8 use the following information. Consider the following cash flows on two mutually exclusive projects: Year Project A Project B 0 -$60,000 -$75,000 1 $38,000 $40,000 2 $36,000 $42,000 3 $29,000 $46,000 The cash flows of Project A are expressed in real terms, whereas those of Project B are expressed in nominal terms. The appropriate nominal discount rate is 12 percent and the inflation rate is 3 percent. What is the NPV for Project B? Round to the nearest cent and format as "XX,XXX.XX"eBook Problem 22-11 Investments Quick and Slow cost $1,000 each, are mutually exclusive, and have the following cash flows. The firm’s cost of capital is 7 percent. Cash Inflows Q S Year 1 $1,100 $309 2 — 309 3 — 309 4 — 309 According to the net present value method of capital budgeting, which investment(s) should the firm make? Use Appendix B and Appendix D to answer the question. Use a minus sign to enter negative values, if any. Round your answers to the nearest cent. NPV (Investment Quick): $ NPV (Investment Slow): $ The firm should make investment(s) . According to the internal rate of return method of capital budgeting, which investment(s) should the firm make? Use Appendix D to answer the question. Round your answers to the nearest whole number. IRR (Investment Quick): % IRR (Investment Slow): % The firm should make investment(s) . If Q is chosen, the $1,100 can be reinvested and earn 8 percent. Does this information…Exercise 14-11 (Algo) Preference Ranking of Investment Projects [LO14-5] Oxford Company has limited funds available for investment and must ration the funds among four competing projects. Selected information on the four projects follows: Project InvestmentRequired PresentValue of Cash Inflows Life oftheProject(years) InternalRateof Return A $ 180,000 $ 224,323 7 21% B $ 151,000 $ 197,000 12 18% C $ 102,000 $ 155,035 7 17% D $ 161,000 $ 233,136 3 16% The net present values should be computed using a 10% discount rate. The company wants your assistance in determining which project to accept first, second, and so forth. Required: 1. Compute the profitability index for each project. 2. In order of preference, rank the four projects in terms of net present value, profitability index, and internal rate of return.
- Exercise 8-17 (Static) Cash Flows; Budgeted Income Statement and Balance Sheet [LO8-2, LO8-3, LO8-4, LO8-9, LO8-10] Wheeling Company is a merchandiser that provided a balance sheet as of September 30 as shown below: Wheeling CompanyBalance SheetSeptember 30 Assets Cash $ 59,000 Accounts receivable 90,000 Inventory 32,400 Buildings and equipment, net of depreciation 214,000 Total assets $ 395,400 Liabilities and Stockholders’ Equity Accounts payable $ 73,000 Common stock 216,000 Retained earnings 106,400 Total liabilities and stockholders’ equity $ 395,400 The company is in the process of preparing a budget for October and has assembled the following data: Sales are budgeted at $240,000 for October and $250,000 for November. Of these sales, 35% will be for cash; the remainder will be credit sales. Forty percent of a month’s credit sales are collected in the month the sales are made, and the remaining 60% is collected in the following month. All…Capital Budgeting 29. A project which requires an investment of $540,000 is expected to generate $5,800 ofnet income in Year 1, $40,000 of net income in Year 2, and $100,000 of net income in Year 3 (Allnet income amounts are after taxes). What is the accounting rate of return for this investment?A. 27%B. 81%C. 9%D. 18% 30. A project that required a $420,000 investment generated no net income for the firstyear of operations, and a net income after taxes of $84,000 in the second year. What is theaccounting rate of return for this investment?A. 0%B. 15.9%C. 6.67%D. 20%3 QS 24-1 (Algo) Payback period and equal cash flows LO P1 Park Company is considering an investment of $29,000 that provides net cash flows of $13,400 annually for four years. What is the investment's payback period? Numerator: Initial investment 1 Payback Period Denominator: Annual net cash flow Payback Period Payback period