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- 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 presentSarasota Inc. has a project that requires a $50,400 after-tax initial investment and produces these after-tax cash flows at each year- end: $18,700; $20,800; -$6,300; $41,800; $59,600; and $22,600. The appropriate domestic discount rate is 23.8 percent. The project is in another developing country, where extra risk is assumed to be 6.1 percent. Calculate the project's NPV. Should Sarasota Inc. accept or reject the project? (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 2 decimal places e.g. 971.25.) NPV $ Sarasota Inc. should the project.Consider a hypothetical economy that has NO tax.ABC Ltd. is considering investing in a 2-year project which is expected to generate the followingyear-end cash flows: C1 = $110 million, C2 = $115 million. The yearly discount rate for the projectis 10%. The initial cost of the project is $200 million.(a) Compute the profit and NPV of the project. (b) Based on the answer of part (a), should the project be accepted? Explain.(c) ABC’s cut-off period is 2 years. Compute the PI and Payback of the project. Based on thesetwo methods, should ABC accept the project?(d) Write down the numerical formula for computing the IRR of this project. What is theminimum IRR value that would make this project acceptable? Explain. (e) Given the recommendations based on the four decision rules above, which project shouldABC Ltd. accept? (f) Now suppose that of the $200m initial expenditure, $50m was used for the purchase of amachine that has an estimated economic life of four years. The machine will be…
- Monty Inc. has a project that requires a $51,300 after-tax initial investment and produces these after-tax cash flows at each year-end: $19,100; $21,100; -$6,600; $42,250; $60,200; and $23,200. The appropriate domestic discount rate is 24.1 percent. The project is in another developing country, where extra risk is assumed to be 6.7 percent. Calculate the project's NPV. Should Monty Inc. accept or reject the project? (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 2 decimal places e.g. 971.25.) NPV $ Monty Inc. should accept OR reject the project.Fijisawa, Inc. is considering a major expansion of its product line and has estimated the following cash flows associated with such an expansion. the initial outlay would be $11,700,000, and the project would generate cash flows of $1,200,000 per year for 20 years. the appropriate discount rate is 6.7%. A. Calculate the NPV b. Calculate the PI C. Calculate the IRR D. should this project be accepted? why or why not?The company is considering two projects. The initial investment in the Project A and Bare $50,000 and $60,000 respectively. The Project A will generate annual cash flows of$26,000 for four years and the Project B will generate annual cash flows of $30,000 forfour years. What must be the required rate of return, so that the company will beindifferent between these two projects?(A)The required rate of return must be 21.86%.(B) The required rate of return must be 37.42%.(C)The required rate of return must be 34.90%.(D) The required rate of return must be 31.39%.
- Tocor is considering the implementation of a lockbox collection system for its mid- western and western sales regions. Sales in those two regions are 30 percent of Tocor's annual sales of $560 million. The lockbox system will cost $187,000 a year and reduce collection time by 3 days. If Tocor could invest any released funds at 10.85 percent, should it use the lockbox system? Assume 365 days per year.Ingram Electric is considering a project with an initial cash outflow of $800,000. This project is expected to have cash inflows of $350,000 per year in years 1, 2, and 3. The company has a WACC of 8.05% which is used as its reinvestment rate. What is the project's modified internal rate of return (MIRR) ?The US based company is investing in a 2-year project in Europe. The initial investment is €10,000. The expected cash inflow in the year one is €6,000 and in the year two is €8,000. The risk-free rate in US is 3% and Europe 2%. If the spot rate is $1.25/€ and the required rate of return of the project is 14%, calculate the NPV of the project in dollars. (A) The NPV of the project in dollars is $1,773.62. (B) The NPV of the project in dollars is $1.704.32. (C) The NPV of the project in dollars is $1,418.90. (D)The NPV of the project in dollars is $1,989,74
- Rocor is considering the implementation of a lockbox collection system for its mid-western and western sales regions. Sales in those two regions are 30 percent of Tocor's annual sales of $560 million. The lockbox system will cost $187,000 a year and reduce collection by time by 3 days. If Tocor could invets any released funds at 10.85 percent, should it use the lockbox system and what would be the savings/loss. Assume 365 days per year.The US based company is investing in a 2-year project in Europe. The initial investment is €10,000. The expected cash inflow in the year one is €6,000 and in the year two is €8,000. The risk-free rate in US is 3% and Europe 2%. If the spot rate is $1.25/€ and the required rate of return of the project is 14%, calculate the NPV of the project in dollars. (A) The NPV of the project in dollars is $1,773.62. (B) The NPV of the project in dollars is $1,704.32. (C) The NPV of the project in dollars is $1,418.90. (D) The NPV of the project in dollars is $1,989.74.The company is considering two projects. The initial investment in the Project A and B are $50,000 and $60,000 respectively. The Project A will generate annual cash flows of $26,000 for four years and the Project B will generate annual cash flows of $30,000 for four years. What must be the required rate of return, so that the company will be indifferent between these two projects? (A) The required rate of return must be 21.86%. (B) The required rate of return must be 37.42%. (C) The required rate of return must be 34.90%. (D) The required rate of return must be 31.39%.