Value a company generating $1,000 from today growing at a rate of 1% forever. Use an opportunity cost of capital of 5% A) 25,250 B) 26,000 Ⓒ25,000 D) 26,250
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- If current assets are $100,000 and current liabilities are $42,000, what is the working capital? A. 200 percent B. 50 percent C. 2.0 D. $58,000Cost of Capital, Net Present Value Leakam Companys product engineering department has developed a new product that has a 3-year life cycle. Production of the product requires development of a new process that requires a current 100,000 capital outlay. The 100,000 will be raised by issuing 60,000 of bonds and by selling new stock for 40,000. The 60,000 in bonds will have net (after-tax) interest payments of 3,000 at the end of each of the 3 years, with the principal being repaid at the end of Year 3. The stock issue carries with it an expectation of a 17.5% return, expressed in the form of dividends at the end of each year (with 7,000 in dividends expected for each of the next 3 years). The sources of capital for this investment represent the same proportion and costs that the company typically has. Finally, the project will produce after-tax cash inflows of 50,000 per year for the next 3 years. Required: 1. Compute the cost of capital for the project. (Hint: The cost of capital is a weighted average of the two sources of capital, where the weights are the proportion of capital from each source.) 2. CONCEPTUAL CONNECTION Compute the NPV for the project. Explain why it is not necessary to subtract the interest payments and the dividend payments and appreciation from the inflow of 50,000 in carrying out this computation.6. A company will invest $37,072 on a capital expenditure (an asset with multi-year use). They estimate it will save $25,166 per year for the next 2 years. If their TVOM is 5.89%, what is the worth of the investment per year? (be sure to include the sign)
- Assuming a cost of capital of 5% and that $60,000 is the correct profit estimate each year for the next 10 years, what is the IRR if NPV=463,304 a. 32.0% b. 8.1% c. 21.0% d. 2.8%a)In 300 words describe what the one-year principle is? b)A company has an asset that has operating and maintenance costs of $5000 per year, increasing by 8% per year. The asset is currently worth $450 000. Can the one year principle be used?1. A company has determined that a certain project will produce revenue of $14 million 1 year from now. The costs are projected to equal $5 million each 2, 3 and 4 years from now. Given a cost of capital of 10%, the Net Present Value of the project equals:$1.42 million $1.56 million$12.72 million$14.00 million
- Net cost of investment is 100,000. Profitability index is 1.3 while cost of capital is 10%. Useful life is 10 years. Use up to two decimal places for the PVF. What is the ARR? A• 42.35% B• 21.17% C• 22.34% D• 30%4. A project capitalized for ₱150,000 invested in depreciable assets will earn a uniform, annual income of ₱59, 547 in 10 years. The costs for operation and maintenance total ₱27,000a year, and taxes and insurance will cost 4% of the first cost each year. If the company expects its capital to earn12% before income taxes, is the investment worthwhile? Show by: Rate of return Solve and show the solution.4. A project capitalized for ₱150,000 invested in depreciable assets will earn a uniform, annual income of ₱59, 547 in 10 years. The costs for operation and maintenance total ₱27,000a year, and taxes and insurance will cost 4% of the first cost each year. If the company expects its capital to earn12% before income taxes, is the investment worthwhile? Show by: Annual cost method Solve and show the solution.
- Net cost of investment is 100,000. Profitability index is 1.3 while cost of capital is 10%. Useful life is 10 years. Use up to two decimal places for the PVF. What is the ARR?1. Lloyd Enterprises has a project which has the following cash flows: Year 0 1 2 3 4 5 Cash Flow -$200,000 50,000 100,000 150,000 40,000 25,000 The cost of capital is 10 percent. What is NPV? Use excel.1.ABC Company is considering a new product. Total assets to support expansion cost is $500,000. It is estimated that ABC Company can generate $1,200,000 for annual sales with a 6% profit margin. What is the net income?a. $30,000b. $72,000c. $1,200,000d. $102,0002.Suppose you inherited $200,000 and invested it at 6% per year. How much could you withdraw at the end of each of the next 15 years?a. $23,431.83b. $24,764.40c. $17,843.15d. $20,592.553.What would the future value of $100 be after 5 years at 10% compound interest?Select one:a. $161.05b. $127.84c. $134.54d.$151.294. ABC Company will pay a dividend of $3.00 per share in the next 12 months (D1). The required rate of return (ke) is 10% and the constant growth rate is 5%. Compute Price of common stock.a. $60.00b. $100.00c. $42.86d. $70.005. XYZ Company’s preferred stock is selling for $25 a share. If the required return is 12%, determine the dividend value be two years from now.a. $3.76b. $2.39c. $2.50d. $3.00
