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- Micheal’s Machinery is a German multinational manufacturing company. Currently, Micheal’s financial planners are considering undertaking a 1-year project in the United States. The project's expected dollar-denominated cash flows consist of an initial investment of $2000 and a cash inflow the following year of $2400. Micheal’s estimates that its risk-adjusted cost of capital is 12%. Currently, 1 U.S. dollar will buy 0.7 Germany. In addition, 1-year risk-free securities in the United States are yielding 6.5%, while similar securities in Germany’s are yielding 4.5%. If this project was instead undertaken by a similar U.S.-based company with the same risk-adjusted cost of capital, what would be the net present value and rate of return generated by this project? Round your answers to two decimal places. What is the expected forward exchange rate 1 year from now? Round your answer to two decimal places. If Micheal undertakes the project, what is the net present value and rate of return of…OpenDoor Cafe is considering opening a new food court in a major US city. The initial investment is expected to be $ 12,550,000. The projected cash flows are $4, 955,000 in years one and two, $2, 185,000 in year three, $2,715,000 in year four, and $3,040,000 on year five. What is this project's internal rate of return? Group of answer choices 6.70% 17.26 % 11.28% 15.02%A fin-tech firm is considering devising a new payment system. The initial cost for developing this system will be $20 million today. Once the system development is completed, in one year, the system will be sold to a major bank for $25 million. Assume that both the development of the system and the sale of the project for $25 million are certain. The firm can pay $20 million of investment entirely using its own cash. Or the firm can also raise funds to finance part of the investment by issuing a security that will pay investors $11 million in one year. Suppose the risk-free rate of interest is 10%. What is the NPV of this project if the fin-tech firm invests its own money and does not issue the new security? What is the NPV if the firm issues the new security? Briefly explain your answer by comparing the NPVs
- Suppose the multinational Milton Asset Extraction (MAX) is considering an overseas project in a country with substantial political risk. MAX predicts that the project will yield USD100 million each year for two years. The initial cost of the project is USD145 million. In any given year there is a 13% chance that the project will be expropriated by the host country’s government. The discount rate for the project is 8%. Calculate the expected net presentCarpet Baggers, Incorporated, is proposing to construct a new bagging plant in a country in Europe. The two prime candidates are Germany and Switzerland. The forecasted cash flows from the proposed plants are as follows: Candidates Germany (millions of euros) Switzerland (millions of Swiss francs) -63 -106 C1 +13 +23 a. Net present value b. Net present value c. Should the company go ahead with either project? d. If it must choose between them, which should it take? C₂ +18 +33 C3 +18 +33 Yes Swiss plant C4 +23 +38 C5 +23 +38 The spot exchange rate for euros is EUR/USD = 1.33, while the rate for Swiss francs is USD/CHF = 1.53. The interest rate is 4% in the United States, 3% in Switzerland, and 5% in the euro countries. The financial manager has suggested that, if the cash flows were stated in dollars, a return in excess of 9% would be acceptable. million million C6 +23 +38 a. Calculate the NPV in dollars for the German plant. Note: Do not round intermediate calculations. Enter your…Suppose that UK Motors Ltd. is considering an investment of £30 million to develop a new factory. Assume that the company’s stockholders require a 22% rate of return, that the company’s bondholders require a 9% rate of return, that the UK corporate tax rate is 40%, that 35% of the project will be financed by debt, and that 65% of the project will be financed with equity. What must be the annual income from the project if it is to be a zero net present value investment? Give typing answer with explanation and conclusion
- Your division is considering two investment projects, each of which requires an up-front expenditure of 25 million. You estimate that the cost of capital is 10% and that the investments will produce the following after-tax cash flows (in millions of dollars): a. What is the regular payback period for each of the projects? b. What is the discounted payback period for each of the projects? c. If the two projects are independent and the cost of capital is 10%, which project or projects should the firm undertake? d. If the two projects are mutually exclusive and the cost of capital is 5%, which project should the firm undertake? e. If the two projects are mutually exclusive and the cost of capital is 15%, which project should the firm undertake? f. What is the crossover rate? g. If the cost of capital is 10%, what is the modified IRR (MIRR) of each project?The management of Kawneer North America is considering investing in a new facility and the following cash flows are expected to result from the investment: A. What is the payback period of this uneven cash flow? B. Does your answer change if year 10s cash inflow changes to $500,000?Each of the following scenarios is independent. All cash flows are after-tax cash flows. Required: 1. Patz Corporation is considering the purchase of a computer-aided manufacturing system. The cash benefits will be 800,000 per year. The system costs 4,000,000 and will last eight years. Compute the NPV assuming a discount rate of 10 percent. Should the company buy the new system? 2. Sterling Wetzel has just invested 270,000 in a restaurant specializing in German food. He expects to receive 43,470 per year for the next eight years. His cost of capital is 5.5 percent. Compute the internal rate of return. Did Sterling make a good decision?
- Sandrine Machinery is a Swiss multinational manufacturingcompany. Currently, Sandrine’s financial planners are considering undertaking a 1-yearproject in the United States. The project’s expected dollar-denominated cash flows consistof an initial investment of $2,000 and a cash inflow the following year of $2,400. Sandrineestimates that its risk-adjusted cost of capital is 10%. Currently, 1 U.S. dollar will buy0.96 Swiss franc. In addition, 1-year risk-free securities in the United States are yielding3%, while similar securities in Switzerland are yielding 1.50%.a. If this project was instead undertaken by a similar U.S.-based company with the samerisk-adjusted cost of capital, what would be the net present value and rate of returngenerated by this project?b. What is the expected forward exchange rate 1 year from now?c. If Sandrine undertakes the project, what is the net present value and rate of return ofthe project for Sandrine?Carlson Inc. is evaluating a project in India that would require a $5.5 million after-tax investment today (t = 0). The after-tax cash flows would depend on whether India imposes a new property tax. There is a 50-50 chance that the tax will pass, in which case the project will produce after-tax cash flows of $1,150,000 at the end of each of the next 5 years. If the tax doesn't pass, the after-tax cash flows will be $1,950,000 for 5 years. The project has a WACC of 12.0%. The firm would have the option to abandon the project 1 year from now, and if it is abandoned, the firm would receive the expected $1.15 million cash flow at t-1 and would also sell the property and receive $4.85 million after taxes at t-1. If the project is abandoned, the company would receive no further cash inflows from it. What is the value (in thousands) of this abandonment option? Do not round intermediate calculations. O a $87 b. 5781 c. $606 O d. 1963 Oe. $693Sandrine Machinery is a Swiss multinational manufacturing company. Currently, Sandrine's financial planners are considering undertaking a 1-year project in the United States. The project's expected dollar denominated cash flows consist of initial investment of $2,000 and a cash inflow the year of $2,400. Sandrine estimates that its risk-adjusted cost of capital is 10%. Currently, 1 US dollar will buy 0.91 Swiss franc. In addition, 1 year risk free securities in the US are yielding 3% while similar securities in Switzerland are yielding 1.50% a) If this project was instead undertaken by a similar U.S. based company with the same risk-adjusted cost of capital what would be the net present value and rate of return generated by this project?