Compute the value of a firm with free cash flows of $4000, $5000, and $6000 over the next three years; a terminal value of $70,000 after three years; and an unlevered cost of capital of 10%. Assume that the interest rate tax shield is zero. a. $17,058 b. $17,536 c. $58,107 d. $60,087 e. $64,869
Q: Assume that one year ago you bought 200 shares of a mutual fund for $20 per share, you received a…
A: Percent of total return will be Calculated by following formula:-Percent of total return =
Q: Record the amount for check #101 in her check register.
A: Since we are not given the current balance of Zoe's Account, the balance after recording the…
Q: QUESTION 9 Abba, Inc is considering the purchase of some new equipment that costs $142,900. The new…
A: To calculate the payback period for the equipment purchase, we need to determine how long it takes…
Q: Your firm expects to receive a $20,000 payment from a supplier in 25 days. Calculate the increase in…
A: Present value is the equivalent value today of the future cash flow based on the time value of money…
Q: Ribelin Corporation is adding a new product line that will require an investment of $218,000. The…
A: Payback period is the period required to recover initial investment of the project that is going on.
Q: Chapter 8. Jeremy Kohn may invest in a 10-year bond that pays a 12 percent coupon semiannually. The…
A: The price of the bond is equal to the present value of the coupon payments and the face value of the…
Q: The managers of an all-equity firm are interested in borrowing $1.2 million and using the proceeds…
A: Value of unlevered firm = EBIT-*(1-Taxes)/ Cost of equity= $700,000*(1-21%)/13%= $4,253,846.154
Q: You are considering opening a new plant. The plant will cost $100.0 million upfront. After that, it…
A: NPV and IRR are both commonly used capital budgeting tools. NPV is the net present value used to…
Q: hree years ago, you invested in the Future Investco Mutual Fund by purchasing 1,000 shares of the…
A: When money is invested in the stock market there are many possible returns in the form of dividends…
Q: Green & Company is considering investing in a robotics manufacturing line. Installation of the line…
A: NPV is also known as Net Present Value. It is a capital budgeting technique which helps in decision…
Q: You invest $100,000 in a hedge fund with a 2/20 fee structure. For the next 3 years, the hedge fund…
A: Investment value= $100,000Annual returnsYear 1= 25.93%Year 2= -10.62%Year 3= 64.83%Fee structure=…
Q: You are trying to value a company that has $600 million of debt, $40 million of cash, and 80 million…
A: Equity value is calculated as follows:-Equity value = Enterprise value -Debt +CashTerminal value…
Q: Frostbite Thermalwear has a zero coupon bond issue outstanding with a face value of $23,000 that…
A: A common calculation in finance for pricing European-style options is the Black-Scholes model &…
Q: The Sisyphean Company has a bond outstanding with a face value of $5,000 that reaches maturity in 8…
A: The yield to maturity is the total return an investor has earned by holding the bond until its…
Q: One year ago, your company purchased a machine used in manufacturing for $110 000. You have learned…
A: The process that analyzes and evaluates any project or investment's feasibility and profitability is…
Q: calculate the Net Present Value, the Internal Rate of Return, the Profitability Index and a Payback…
A: The below are the techniques to evaluate the project under capital budgeting problems and below is…
Q: The force of interest delta(t) is given by 1/(1+2t) for all non-negative values of t. Find a(3).
A: The pace at which money grows instantly or over an incredibly short period of time is known as the…
Q: is a total of $1,750 per month. There are no other costs. Brownies sell for $3 each. A: How many…
A: Breakeven Point : The break-even point is a fundamental concept in business and finance that…
Q: What is the value of a new $1,000 par value bond
A: Price of the bond is the PV of all future coupons and par value discounted at the YTM. Now in this…
Q: Select all that are true with respect to the adjusted present value (APV) DCF methodology. Group of…
A: Stock valuation is the process of determining the intrinsic value of a company's stock and various…
Q: Three-year Treasury bills currently yield 6 percent. Four-year Treasury Assume that the expectations…
A: Three-year Treasury bill current yield is 6%.Four-year Treasury bill current is 6.5%.
Q: A tech firm called IDK, Inc. has bonds that carry a 4% semi-annual coupon. These bonds mature in 16…
A: A bond is a kind of debt security issued by the government and private companies to the public for…
Q: You invested $25,000 in a mutual fund at the beginning of the year when the NAV was $33.16. At the…
A: Rate of return for mutual fund holders can be calculated by using equation below
Q: manager in a recent quarter, (1) identify the Alpha of the managers portiollo compared to benchmark…
A: First, we need to determine the expected return of the manager and the benchmark return using the…
Q: Suppose that five years ago you took a fixed-rate mortgage on your home for $150,000 at 7.75% for 30…
A: The Net Present Value (NPV) of refinancing is the calculation of the potential financial gain or…
Q: The Ziggy Trim and Cut Company can purchase equipment on sale for $4,300. The asset has a three-year…
A: NPV is very important and useful method in selecting projects based on time value of money. NPV can…
Q: C. Analyst 3 agrees with Analyst 2 about growth rate of the company but she believes the company to…
A: As per request, question C will be solved. We can determine the price of the stock as the PV of all…
Q: Globalisation is the process by which businesses or other organizations develop international…
A: Globalization is a complex and multifaceted process that involves businesses and organizations…
Q: Richard just entered a university, and his parents are planning to give him a car upon graduation.…
A: Future value is computed by following formula:-FV = A*(1+r)nwhereFV = future valueA = amount…
Q: eed Detailed answer with steps please 30. Considering the following information, what is the NPV if…
A: NPV of refinance can be calculated as the present value of savings from refinance minus cost of…
Q: ssuming a six-year time horizon, what is the internal rate of return of the remodeling project?…
A: Internal rate of return is the break even rate at which present value of cash flow is equal initial…
Q: Professor Wendy Smith has been offered the following opportunity: A law firm would like to retain…
A: IRR and NPV are the capital budgeting tools that help to decide on whether the capital project…
Q: An insurance company collected $4.2 million in premiums and disbursed $2.02 million in losses. Loss…
A: Net profitablity in dollars can be calculated by using equation belowNet profitablity = Total…
Q: Ogren Corporation is considering purchasing a new spectrometer for the firm's R&D department. The…
A: NPV is also known as Net Present Value. It is a capital budgeting technique which helps in decision…
Q: You are managing a portfolio of $1 million. Your target duration is 10 years, and you can invest in…
A: A mix of various investment alternatives that an investor puts his money into is regarded as a…
Q: Assume that your client invests $2,700 at the end of each of the next two years. The investments…
A: Time value of money (TVM) refers to the concept which proves that the value of money today is higher…
Q: In 2021, Noble Tech Inc. reported that the company's Return on Assets (ROA) was 10%, and its net…
A: 1.Total asset turnover formula.Total asset turnover = 2.Return on assets = 3.Net profit Margin =
Q: You run a construction firm. You have just won a contract to build a goverment office building. It…
A: NPV means PV of net benefits which will arise from the project during the period. It is computed by…
Q: New Business Ventures, Inc., has an outstanding perpetual bond with a coupon rate of 8 percent that…
A: Here,ParticularsValuesFace value of the bond $1,000.00Call premium $ 100.00Coupon rate8.00%YTM…
Q: Use the average daily balance method to compute the finance charge on the credit card account for…
A: Finance charge refers to the type of cost used to incur through the borrowing of the funds. It…
Q: Investment A is currently worth $77,700 and is growing at the rate of 11% per year compounded…
A: The FV of an investment refers to the combined value of the cash flows at a future date assuming…
Q: Erica purchases a retirement annuity that will pay her $1,500 at the end of every six months for the…
A: Purchase price of annuity would be the present value of payments received from annuity based on time…
Q: NPV versus IRR Consider the following two mutually exclusive projects: Year 0 1 2 3 Cash Flow (X)…
A: The crossover rate refers to the rate of discount at which the net present value of two projects is…
Q: A zero-coupon bond has a $100 face value, matures in 10 years and currently sells for $781.20 . a…
A: A zero coupon bond pays no annual coupon. We can determine the price or return of the bond by…
Q: A company just paid an annual dividend of $0.66. Dividends are expected to grow by 25% in 1 year,…
A: Current price of share is that price which can be paid for purchase of the share. It is also called…
Q: McGilla Golf has decided to sell a new line of golf clubs. The company would like to know the…
A: Capital budgeting, also known as investment appraisal, is a financial planning process used by…
Q: Annie's Homemade currently owns one push cart along with a branded tent to facilitate off-site…
A: 1.Calculation of the net cash inflow for one additional off-site event:Formula used:
Q: An obligation of $17 320 is due two years from now with interest at 9.2% compounded annually. The…
A: In this the present value of payments due and present value of payments done must be same at give…
Q: Questions 11 to 12 The discount rate for the US T-bill that was issued on October 12, 2023 and…
A: First we need to determine the number of days from Oct 12,2023 to Jan 11,2024. This is 91 days. We…
Q: You bought one of Great White Shark Repellant Company's 11 percent coupon bonds one year ago for…
A: A bond is a kind of debt security issued by the government and private companies to the public for…
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 5 images
- Assume that an investment of 100,000 produces a net cash flow of 60,000 per year for two years. The discount factor for year 1 is 0.89 and for year 2 is 0.80. The NPV is a. 0 b. 6,800 c. 1,400 d. (4,000)Compute the value of a firm with free cash flows of $1,000, $2,500, and $3,000 over the next three years, a terminal firm value of $40,000 after three years, and the unlevered cost of capital is 15%. Assume that the interest rate tax shield is zero. O a. $26,191 O b. $27,234 Oc. $31,033 O d. $39,343Suppose Alcatel-Lucent has an equity cost of capital of 10%, market capitalization of $10.8 billion, and an enterprise value of $14.4 billion. Suppose Alcatel-Lucent’s debt cost of capital is 6.1% and its marginal tax rate is 35%. The cash flow for the project is as follows, same as was given in the previous question. Year 0 1 2 3 FCF -100 50 100 Calculate FCFE for each year but only answer: What is the Percentage change in FCFE in Year 2 from Year 1? Please give your answer in Percentage up to 2 places of Decimal without giving the % sign.
- A company forecasts free cash flow of $400 at Year 1 and $600at Year 2; after Year 2, the FCF grow at a constant rate of 5%.The company forecasts the tax savings from interest deductionsas $200 in Year 1, $100 in Year 2; after Year 2, the tax savingsgrow at a constant rate of 5%. The unlevered cost of equityis 9%. What is the horizon value of operations at Year 2?($15,750.0) What is the current unlevered value of operations?($14,128.4) What is the horizon value of the tax shield at Year 2?($2,625.0) What is the current value of the tax shield? ($2,477.1)What is the levered value of operations at Year 0? ($16,605.5)14. Suppose that you have generated the estimates listed below from a pro forma analysis for a company that had requested a three year loan. The loan is a $1.5 million term loan with the equal annual payments of principals. The P&I payments are due at the end of each year with the annual interest rate = Prime rate + 1.5%. Capital expenditure Cash dividends Cash flow from operations before interest expense a). b). c). Yr.1 250,000 140,000 750,000 Assuming the Prime rate = 7.5% each year. What will be the interest payment at year 3? 25,000 50,000 45,000 53,000 10,000 Yr. 2 125,000 140,000 780,000 Yr. 3 75,000 140,000 800,000Show the complete solution and explanation. Thank you. 1. A company with cost of capital of 15% plans to finance an investment with debt that bears 10% interest. The rate it should use to discount the cash flows is
- Give typing answer with explanation and conclusion A company has an expected EBIT of $18,000 in perpetuity, a tax rate of 35%, and a debt-to- equity ratio of 0.75. The interest rate on the debt is 9.5%. The firm’s WACC is 9%. a) If the company has not debt, what would be the unlevered cost of capital and firm value? b) Suppose now the company has $55,714.29 in outstanding debt. Using your answer to part a) and M&M Proposition I with taxes, what is the value of this levered firm?The firm forecasts a free cash flow of ₱ 41 million in Year 3, i.e., at t = 3, and it expects FCF to grow at a constant rate of 5% thereafter. If the weighted average cost of capital is 11% and the cost of equity is 15%, what is the horizon value, in millions at t = 3? a. ₱ 840 b. ₱ 717c. ₱ 883 d. ₱ 834Suppose Leonard, Nixon, & Shull Corporation’s projected free cash flow (FCF) for next year is $750,000, and FCF is expected to grow at a constant rate of 4% indefinitely. If the company’s weighted average cost of capital is 10%, what is the value of its operations? a. $18,750,000 b. $12,500,000 c. $7,500,000 d. $13,000,000 e. $10,833,333
- If NUBD Co. requires a minimum return on its investments of 15%, what is their residual income? A. P1,250,000 B. P4,500,000 C. P6,750,000 D. P750,000You are given the following information for a firm: EBIT x (1-T) this period Depreciation Net Working Capital Increase Asset Beta Capital Expenditures Growth Rate of FCF Risk Free Rate = = $17 million $2.4 million $0 1.1 $3.7 million 9% 3% Market Risk Premium Using the above data, what is the present value of all FCF? Don't forget that in applying the growing perpetuity formula, you have to use not this year's FCF, but next period's FCF (multiply this period's FCF by (1 + growth rate of FCF). 6.3% Your answer should be in $millions. For example, if your answer is $7.34 million, then enter 7.34 in the answer box.4. Your firm is evaluating a project that should generate revenue of P4,600 in year 1, P5,200 in year two, P5,900 in year three, and P5,700 in year four. The firm receives each cash flow at the end of each year. If your firm's required return is 12%, what is the future value of these cash flows at the end of year four? a.P16,074.51b.P22,583.53c.P25,293.55d.P28,328.77