A New App Development Team from the Global MBA Program at Universidad Rey Juan Carlos of Spain is working on an apparel shopping tool that can scan your body using your cell phone and find the best fitting clothes for you, which are then modeled by your own dynamic image right there on the screen. Being high-tech, the term is limited to one year, as innovations will be necessary to keep it from being copied or rendered obsolete. EBITDA for the end of year one is expected to be $50,000,000, while developing costs and investments amount to $ 10,000,000. The IRR applicable to IT projects is 57%, as indicated by S&P's sector ROI today. Which of the following is the correct NPV of their project if conceived for one year only? Limit to 2 decimals O $31,847,133.75 O None of the above is correct O $10,284,798.57 $21,847,133.75
Q: An investment has the potential of eaming you $5000 at a 15 percent probability, $3000 at a 45…
A: Expected value of investment = Summation of potential investment earnings × Probability of each…
Q: Seacrest Corporation is a privately- owned chemical company, that is expected to generate a return…
A: Price to book artio is determined using the formula provided. For Seacrest ROE = 20% growth rate…
Q: As per the latest tax update, the aggregate amt of distributions recvieved by an indivivdual,tat may…
A: The start of the pandemic had effected the financials of individuals and had affected the economy.…
Q: On October 31, 2021, you find the following bond quote for Global Own, Inc. Answer the following…
A: Ans 1) Tenure of the Bond = 29 years Face Value = 100…
Q: You have just retired with savings of $10 million. If you expect to live for 60 years and to earn 8%…
A: Solution:- When an equal amount is spent each period at beginning of the period, it is known as…
Q: 17. The purpose of computing a minimum variance hedge ratio is to minimize the variance of the: (a)…
A: Minimum Variance Hedge Ratio is also known as optimal hedge ratio. The minimum variance hedge ratio…
Q: 2. A manager wants to swap a bond for a bond with the same price but a higher duration. Which of the…
A: Bond duration is a measure to know the changes in bond prices with respect to interest rates and…
Q: Compatible management style is an important consideration when choosing a Venture Capital firm. True…
A: Introduction: When selecting a venture capital firm, management style is a crucial factor to…
Q: Mf4. All of the following are advantages of a stock dividend distribution to shareholders on…
A: When a company issue additional shares to the existing shareholders as dividends instead of cash…
Q: Capital structure = percent of debt and equity used to fund the firm’s assets True Fals
A: Capital structure refers to the mix of debt and equity in a company’s capital. Essentially it is the…
Q: Suppose the interest rates in the market for one-year, zero-coupon Treasury strips and for one-year,…
A: The interest rates in the market for one-year, zero-coupon Treasury strips (i) = 2.05%…
Q: Preferred stock is the least used of all long-term securities because A)…
A: Preferred stock is the stock issued that gives the holders a right of preferential payments when…
Q: A mutual fund has total assets of $39,333,444 and liabilities of $6,753,789. If there are 11,521,000…
A: The net asset value of the fund is a representation of the per-share value of any mutual fund. This…
Q: A trustee-in-bankruptcy is selected by the company board of directors. True False
A: A trustee-in-bankruptcy is a person who represents a debtor's estate in a bankruptcy proceeding. He…
Q: 0 face value fixed-rate preferred stock pays an annual dividend of $7.50 per share. What is the…
A: But the required rate return Kp =9.50%
Q: period You are considering independent projects: project A, project B, and project C. Given the…
A: Project A & Project B would be accepted.
Q: Consider the case of the Cast Iron Company. On each nondelinquent sale, Cast Iron receives revenues…
A: Granting credit allows the other party to defer payment in exchange for interest or cost of credit.…
Q: 20,000
A: Spot price = 2500 / 1000 KG The future of stock palm oil is 1000 kg lot. Take it is being sold…
Q: Terrier Nation Inc. expects to pay a dividend of $8 at the end of Year 4 (they do not expect to pay…
A: In the given case, the dividend for Years 1,2 and 3 are not expected to be paid . So, the dividend…
Q: A debt of $10,000 with interest at 8% compounded quarterly is to be repaid by equal payments at the…
A: The amount of Debt is $10,000 The interest rate is 8% Compounded Quarterly The time period is 2…
Q: You are interested in valuing that describes the evolution of the one-year interest rate in…
A: Several Bonds
Q: 6. You currently own a technology stock that has an expected return of 14.9% and its beta is 1.44.…
A: CAPM is the basic theory that links risk and return for all assets. CAPM equation is rs =Rf…
Q: To create a delta-neutral portfolio, the SIT fund has sold 10,000 at-the-money (ATM) put options on…
A: An option is a type of financial instrument that is based on the value of underlying securities,…
Q: You are considering buying a 10-year-old machine for $280, or a new fuel-efficient machine for $600.…
A: The difference between the current value of cash inflows and outflow of cash over a period of time…
Q: How foreign currency risk can affect the value of a multinational company?
A: Foreign currency risk is the risk due to change in the value of domestic currency with respect to…
Q: A 9.75% coupon bond is priced at 103.52. The last semi-annual coupon payment was made on February…
A: When a bond is between coupon payment periods, its price is made up of two parts one is flat price…
Q: 11. Consider the same information from the previous question. The price of a six-months forward…
A: Data given: S0=100 R=Risk free rate=(1+0%)=1 u= $110/100=1.1 d=$90/100 =0.9
Q: el buys a new pickup truck on a 72 - month lease at 5 % compounded annually with $ 5,000 down . If…
A: The down payment is the amount of cash given at the time of the purchase. The down payment decreases…
Q: rate
A: 1. A higher income tax is not good for an individual, as higher income tax results in poor saving…
Q: A stock has yielded returns of 9 percent, 16 percent, 20 percent, and -5 percent over the past four…
A: The return on a stock is analyzed by calculating the mean return and the variability of returns is…
Q: PART B: BORROWING MONEY Serena is going to college to study nursing. She estimates that she will…
A: Honor code: Since you have asked multiple questions, we will solve the first question for you. If…
Q: A stock ended 2011 at$39.79per share and paid a$110dividend in 2012. What is the holding period…
A: The holding period return is the return after considering the capital gains as well as dividend…
Q: Entering in a swap contract is always advantageous for both parties True False
A: Swaps: Swaps are derivative financial instrument contracts between two parties allowing the…
Q: When a currency appreciates it makes domestic businesses competitive with imported goods in their…
A: When a currency of a country appreciates relative to another country, the country’s goods prices…
Q: You want to set up a covered call position on 1,000 shares of XYZ stock. Your goal is to collect the…
A: An option contract is an agreement that provides the buyer with the right to acquire or transfer a…
Q: Netflix is considering building a new production facility in New Jersey. Netflix's financial team…
A: Free cash flow(FCF) of the project is calculated using following equation Free cash flow =…
Q: A currency speculator wants to speculate on the future movements of the e. The speculator expects…
A: Currency Speculator
Q: Penske has come up with a new gadget prototype and is ready to go ahead with pilot production and…
A: High Demand Initial Investment = 3.1…
Q: Use the Black - Scholes formula to find the value of a call option based on the following input.…
A: Time to expiration (T) = 0.5 year Standard deviation (σ) = 20% Exercise price (X) =…
Q: won the state lottery and took the payout as a $1,823,475 lump sum today. Your spouse has decided…
A: The expected amount of money in the account can be determined using the future value concept. The…
Q: The covariance of stock Walter Inc. and Boo-boo Corp. is 0.50. The standard deviation of Walter is 1…
A: Stocks refer to the concept which is defined as the security that represents the ownership of the…
Q: The 1-year zero-coupon bond is trading at $93.46, while the 1-year coupon bond, with a semi- annual…
A: A bond is a debt instrument used to raise capital from investors rather than traditional…
Q: FTC Capital recently issued bonds that mature in 15 years. They have a par value of$1,000, and an…
A: Issue price of bonds would be present value of interest annuity & maturity amount at market rate…
Q: Assume UMASS Boston just received 10 million dollars from a major donor and the school's fund can…
A: Compound interest is a calculation where interest is added to the principal amount every year hence…
Q: Which of the following statement about the payback period method for capital budgeting decisions is…
A: Payback period is the length of time it takes to recover an investment. It is a simple method of…
Q: The expected constant-growth rate of dividends is % for a stock currently priced at $73, that just…
A: Constant growth rate is calculated using following equation P0=D0×1+gr-g Where, P0 is current stock…
Q: You work for a nuclear research laboratory that is contemplating leasing a diagnostic scanner…
A: The total amount of money that might be saved if a person or corporation chose to lease an item…
Q: 25. The current price of stock ABC is $98 and the put option with a strike at $100 is trading at…
A: The current Stock Price,S is $98 Strike price,K is $100 Price of put , Pis $6.34 Price of Call, C is…
Q: If the bonds can be called in five years at a premium of 10.0 percent over par value, what is the…
A: We compute the yield to call. Current price of the Bond = 1133.81…
Q: Suppose you observe the following situation: Security Peat Co. Re-Peat Co. Beta 1.70 .85 Expected…
A: In the given case, beta and the expected return of each security is given . So , the risk free…
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 2 images
- You are considering adding a new software title to those published by your highly successful software company. If you add the new product, it will use capacity on your disk duplicating machines that you had planned on using for your flagship product, “Battlin’ Bobby.” You had planned on using the unused capacity to start selling “BB” on the West coast in two years. You would eventually have had to purchase additional duplicating machines 10 years from today, but using the capacity for your new product will require moving this purchase up to 2 years from today. If the new machines will cost $113,000 and can be expensed under Section 179, your marginal tax rate is 21 percent, and your cost of capital is 14 percent, what is the opportunity cost associated with using the unused capacity for the new product? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.)You are considering adding a new software title to those published by your highly successful software company. If you add the new product, it will use capacity on your disk duplicating machines that you had planned on using for your flagship product, “Battlin’ Bobby.” You had planned on using the unused capacity to start selling “BB” on the west coast in two years. You would eventually have had to purchase additional duplicating machines 10 years from today, but using the capacity for your new product will require moving this purchase up to two years from today. If the new machines will cost $101,000 and can be expensed under section 179, your marginal tax rate is 21 percent, and your cost of capital is 10 percent, what is the opportunity cost associated with using the unused capacity for the new product?our highly successful software company is considering adding a new software title to your list. If you add the new product, it will use the full capacity of your disk duplicating machines that you had planned on using for your flagship product, “Battlin’ Bobby.” You had previously planned on using the unused capacity to start selling “BB” on the West Coast in two years. Eventually, you would have had to purchase additional duplicating machines 10 years from today, but since your new product will use up the extra capacity, this will require moving this purchase up to 2 years from today. If the new machines will cost $101,000 and can be expensed under Section 179, your marginal tax rate is 21 percent, and your cost of capital is 10 percent, what is the opportunity cost associated with using the unused capacity for the new product? Do not round intermediate calculations. Round your answer to 2 decimal places
- Your highly successful software company is considering adding a new software title to your list. If you add the new product, it will use the full capacity of your disk duplicating machines that you had planned on using for your flagship product, “Battlin’ Bobby.” You had previously planned on using the unused capacity to start selling “BB” on the West Coast in two years. Eventually, you would have had to purchase additional duplicating machines 10 years from today, but since your new product will use up the extra capacity, this will require moving this purchase up to 2 years from today. If the new machines will cost $100,000 and can be expensed under Section 179, your marginal tax rate is 21 percent, and your cost of capital is 12 percent, what is the opportunity cost associated with using the unused capacity for the new product? Note: Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.You work for Apple. After toiling away on $9.9 million worth of prototypes, you have finally produced your answer to Google Glasses: iGlasses (the name alone is genius). İGlasses will instantly transport the wearer into the world as Apple wants him to experience it: Tunes with the wink of an eye and apps that can be activated just by looking at them. You think that these will sell for five years until the next big thing comes along (or until users are unable to interact with actual human beings). Revenues are projected to be $448.4 million per year along with expenses of $349.4 million. You will need to spend $59.6 million immediately on additional equipment that will be depreciated using the 5-year MACRS schedule. Additionally, you will use some fully depreciated existing equipment that has a market value of $10.7 million. As the iGlasses are an outcome of the R&D center, Apple plans to charge $4.8 million of the annual costs of the center to the iGlasses product for four years.…Joe’s Jewellery has 45 stores in major malls acround the country. They are considering starting an online business which will require a substantial investment in technology. What are benefits they could not quantify using NPV?
- Suppose that FedEx Kinko’s has decided to install personal computers and printers in its Pittsburgh store that will be rented to customers on an hourly basis. FedEx Kinko’s management has called in consultants from a number of computer suppliers to assist it in designing a system. After considering a number of alternatives, FedEx Kinko’s decided that an Apple computer system consisting of eight iMac computers and two printers best meets its current and projected future needs. FedEx Kinko’s evaluated the desirability of the acquisition of the Apple computer system using its normal capital budgeting procedures. It found that the computer system has a large positive expected net present value. Jim Horn, a new management trainee in the financial planning office, has recently been reading about the boom in the leasing industry. He feels that if leasing is growing as rapidly as it seems, there must be some significant advantages to the leasing alternative compared to ownership. If purchased,…Suppose you decide (as did Steve Jobs and Mark Zuckerberg) to start a company. Your product is a software platform that integrates a wide range of media devices, including laptop computers, desktop computers, digital video recorders, and cell phones. Your initial market is the student body at your university. Once you have established your company and set up procedures for operating it, you plan to expand to other colleges in the area and eventually to go nationwide. At some point, hopefully sooner rather than later, you plan to go public with an IPO and then to buy a yacht and take off for the South Pacific to indulge in your passion for underwater photography. With these issues in mind, you need to answer for yourself, and potential investors, the following questions. a. What is an agency relationship? When you first begin operations, assuming you are the only employee and only your money is invested in the business, would any agency conflicts exist? Explain your answer. b. If you…Suppose you decide (as did Steve Jobs and Mark Zuckerberg) to start a company. Your product is a software platform that integrates a wide range of media devices, including laptop computers, desktop computers, digital video recorders, and cell phones. Your initial market is the student body at your university. Once you have established your company and set up procedures for operating it, you plan to expand to other colleges in the area and eventually to go nationwide. At some point, hopefully sooner rather than later, you plan to go public with an IPO and then to buy a yacht and take off for the South Pacific to indulge in your passion for underwater photography. With these issues in mind, you need to answer for yourself, and potential investors, the following questions. 2. If you expanded and hired additional people to help you, might that give rise to agency problems? Explain your answer
- Suppose you decide (as did Steve Jobs and Mark Zuckerberg) to start a company. Your product is a software platform that integrates a wide range of media devices, including laptop computers, desktop computers, digital video recorders, and cell phones. Your initial market is the student body at your university. Once you have established your company and set up procedures for operating it, you plan to expand to other colleges in the area and eventually to go nationwide. At some point, hopefully sooner rather than later, you plan to go public with an IPO and then to buy a yacht and take off for the South Pacific to indulge in your passion for underwater photography. With these issues in mind, you need to answer for yourself, and potential investors, the following questions. 3. Suppose you need additional capital to expand, and you sell some stock to outside investors. If you maintain enough stock to control the company, what type of agency conflict might occur?Suppose you decide (as did Steve Jobs and Mark Zuckerberg) to start a company. Your product is a software platform that integrates a wide range of media devices, including laptop computers, desktop computers, digital video recorders, and cell phones. Your initial market is the student body at your university. Once you have established your company and set up procedures for operating it, you plan to expand to other colleges in the area and eventually to go nationwide. At some point, hopefully sooner rather than later, you plan to go public with an IPO and then to buy a yacht and take off for the South Pacific to indulge in your passion for underwater photography. With these issues in mind, you need to answer for yourself, and potential investors, the following questions. 6. What is corporate governance? List five corporate governance provisions that are internal to a firm and under its control. What characteristics of the board of directors usually lead to effective corporate…Suppose you decide (as did Steve Jobs and Mark Zuckerberg) to start a company. Your product is a software platform that integrates a wide range of media devices, including laptop computers, desktop computers, digital video recorders, and cell phones. Your initial market is the student body at your university. Once you have established your company and set up procedures for operating it, you plan to expand to other colleges in the area and eventually to go nationwide. At some point, hopefully sooner rather than later, you plan to go public with an IPO and then to buy a yacht and take off for the South Pacific to indulge in your passion for underwater photography. With these issues in mind, you need to answer for yourself, and potential investors, the following questions. 4. Suppose your company raises funds from outside lenders. What type of agency costs might occur? How might lenders mitigate the agency costs?