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- A firm is considering purchasing equipment to manufacture a new product. The equipment will cost $3M, and expected net cash inflowsare $0.35M indefinitely. If market demand for theproduct is low, then over the next five years thefirm will have the option of discarding the equipment on a secondary market for $2.2M. Assume thatMARR = 12%, s = 50%, and r = 6%. What isthe value of this investment opportunity for the firm?Liability payments of $482, $317, and $499 each due to be paid in 2, 5 and 7 years from now, respectively. Asset cash-flow consists of Aj and A2 in 4 year and 6 years from now, respectively. If the yield curve of for all maturities is 11%, find Aj and A2 that ensures an Asset-Liability matching. (a) What is the value of A¡? (b) What is the value of A2?Most businesses replace their computers every two to three years. Assume that a computer costs $2,000 and that it fully depreciates in 3 years, at which point it has no resale value and is thrown away. Suppose the computer did not fully depreciate but still had a $250 value at the time it was replaced. What is the minimum annual cash flow that a computer must generate to be worth the purchase? The minimum annual cash flow must be at least $
- Identify the impact of concept Bill of Lading and various types of document of title.eBook Net Present Value Method—Annuity Take a Load Off Hotels is considering the construction of a new hotel for $12,000,000. The expected life of the hotel is 6 years with no residual value. The hotel is expected to earn revenues of $12,400,000 per year. Total expenses, including straight-line depreciation, are expected to be $10,000,000 per year. Take a Load Off's management has set a minimum acceptable rate of return of 12%. a. Determine the equal annual net cash flows from operating the hotel.$fill in the blank 1 b. Calculate the net present value of the new hotel, using the present value factor of an annuity of $1 table below. If required, round to the nearest dollar. If the net present value is negative, enter the amount using a minus sign. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791…1-5 Calculate financial net income AFIT and net cash flow AFIT for year 3 only. Your Time 0 investment for a pumping unit is $50,000. An- nual gross revenues are $40,000. Direct costs are $5,000 per year. Depreciation for financial net in- come is calculated assuming a 5 year life, no salvage value, and the straight line method. Cash income taxes are 40% of gross revenue. Assume cash taxes for your financial net income model.
- Cost component Alpha Beta Charlie development 100,000 immediately 150,000 year 1 10,000 immediately None Programming 45,000 immediately 35,000 year 1 45,000 immediately 30,000 year 1 None Operations 50,000 1-10 80,000 years 1-10 150,000 years 1-10 support 30,000 1-10 40,000 years 1-10 none If each system is expected to have a 10-year life, 1. calculate the net present value for each system if the cost of capital is 8%. 2. Specify which system should be selected and whyPak 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%.)12.5 A chemical plant is considering installing a new water purification system that costs $21 500. The expected service life of the system is 10 years and the salvage value is computed using the declining-balance method with a depreciation rate of 20 percent. The operating and maintenance costs are esti- mated to be $5 per hour of operation. The expected savings are $10 per operat- ing hour. a. Find the annual worth of the new water purification system if the current operating hours are 1500 per year, on average. The MARR is 10 percent. b. What is the break-even level of operating hours? Construct a graph showing the annual worth for various levels of operating hours. the answers should be a) =4145.74 b)=671 need the solutions please to be clear to understand
- A department store charges one and one-half percent per month on credit purchases. This is equivalent to a nearest nominal annual interest of a. 15% b. 18% c. 19.60% d. 21% e. 1.04%2. The municipality of Trento has arranged to borrow P30 million in order to implement several publicprojects (flood control, drainage system, etc.). The interest rate will be 3% per year, payable at theend of each year. This P30 million debt will be retired by making principal payments of P5 million atthe end of each year. The SB Members is concerned that it will take too long to pay off this debt. Howmany years will it take to fully pay the P30 million debt and its associated interest payments? (5 pts)(Show the Cash flow diagram and your solutions).Legel Q L Given Given 76 248 492 +84 1.100 1,416 1.708 1.952 - NM & 1 2 3 4 S 9 > 7 8 K Given S N N N N N N N N 241 2 2 APL Q/L 76 124 A 961 220 B ttc 244 MPL AQ/AL J 244 292 316 ta DEMON