S You may attempt this question 2 more times for credit. This question is a variant of the Sport Hotel example that was presented in class, in the class notes, and in the Real Option chapter. Suppose that in the example, the first year expenditures that include the purchase of plans and permits is not $1 million but instead $0.9 million. All other aspects of the problem are the same as originally presented. Incorporating these new values, the probability that the city is awarded the franchise at 50%, and the real option, what is the new NPV of the project? $ million Place your answer in millions of dollars using at least three decimal places. For example, the answer of nine hundred seventy five thousand would be entered as 0.975 and not as 975000.
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- You own a construction company and have recently received a contract with the local school district to refurbish one of its elementary schools. You are given an up-front payment from the school district in the amount of $5 million. The contract terms extend from years 2018 to 2020. When would you recognize revenue for this payment? What method of accounting would you use for this construction project and why? What would be the benefits and challenges with your method selection? Give an example of your distribution selection and associated costs of the project (you may estimate based on other industry competitors). What might be some benefits and challenges associated with the other method of construction revenue recognition?Sam Strother and Shawna Tibbs are vice presidents of Mutual of Seattle Insurance Company and co-directors of the company’s pension fund management division. An important new client, the North-Western Municipal Alliance, has requested that Mutual of Seattle present an investment seminar to the mayors of the represented cities, and Strother and Tibbs, who will make the actual presentation. C) How does one determine the value of any asset whose value is based on expected future cash flows? D)How is the value of a bond determined? What is the value of a 10-year, $1,000 par value bond with a 10% annual coupon if its required rate of return is 10%? E) What would be the value of the bond described in Part d if, just after it had been issued, the expected inflation rate rose by 3 percentage points, causing investors to require a 13% return? Would we now have a discount or a premium bond?Greater Findlay Development Consortium is preparing to open a new retail strip mall and have multiple businesses that would like lease space in it. Each business will pay a fixed amount of rent plus a percentage of the gross sales generated each year. The cash flows from each of the businesses has approximately the same amount of risk. The business names, annual expected cash flows, and initial capital outflow for each of the businesses that would like to lease space in the strip mall are provided below. Greater Findlay Development Consortium uses a 12% hurdle rate which is its cost of capital. All business will be evaluated based on 4-year term because the contract will expire in four years. Video Now Apple Garden Croger Mart Horizon Wireless Initial Capital Outlay ($200,000) ($298,000) ($248,000) ($272,000) Annual Net Cash Flows Year 1 65,000 100,000 80,000…
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- PLEASE, PERFORM THE EXERCISE IN EXCEL AND SHOW THE FORMULAS (only if it is neccesary) 6.-Which is more convenient: to invest in a cooperative society that guarantees to double the invested capital every 10 years, or to deposit in a savings account that offers 7% capitalized quarterly? Note:In the image, this is the original exercise, it is in Spanish, but it is easy to understand.As a newly employed Chief Finance Officer of EKM School Complex, you are offered the following two mutually exclusive projects. Cash flows (GHS) a) What are the IRRs of these two projects? (Use the formula provided in the appendix) b) If you are told only the IRRs of the projects, which would you choose? c) What did you ignore when you made your decision in part (b)? d) According to the NPV rule, which one of these two projects should be pursued? Assume appropriate discount rate of 15%. Year Project A Project B 0 -5,000 -100,000 1 4,500 65,000 2 4,500 65,000As a newly employed Chief Finance Officer of EKM School Complex, you are offered the following two mutually exclusive projects. Cash Flows(GHS) Year Project A Project B 0 -5,000 -100,000 1 4,500. 65,000 2. 4,500 65,000 a) What are the IRRs of these two projects? (Use the formula provided in the appendix) b) If you are told only the IRRs of the projects, which would you choose? c) What did you ignore when you made your decision in part (b)? d) According to the NPV rule, which one of these two projects should be pursued? Assume appropriate discount rate of 15%. Appendix For all IRR calculations please use the formula below IRR = a+(b-a)[NPV@a/NPV@a - NPV@b]
- The "Your Business or Mine" is a manufacturer of high-altitude balloons in Waco, Texas. The company is planning to expand its operations in 2023 and is interested in securing a loan for Tex-Mex National Bank of Waco. Four banks were visited, and their interest rates for the 15-year loan were recorded. As someone knowledgeable about the engineering economy and capital investment justification, which bank would you recommend to this company?The following questions are on the concepts and takeaways learned in the modules on the TimeValue of Money and Applications of FV and PV. Most do not have numbers associated withthem, however you can come up with your own to fit the situation if you have to. 1. Mary, Gary, Sherry and Larry were given the same sum of money to invest fiveyears ago. Annual interest rates for each have been the same over those five years, howevertoday Larry has the most money, Sherry the second most, Mary the third most and Gary theleast. Given this, which has had interest compounded annually, semiannually, quarterly ormonthly? 2. Flo, Moe, Joe and Ro are planning to get the same amount ten years from nowfrom an investment made today, with interest being the same for all four. But not all haveinvested the same amount; the order, from smallest to largest, is Ro, Flo, Joe and Moe. Rankeach person, from least to most, in terms of how often interest on their investment is to becompounded each year over the…The city of Columbus has identified three options for a public recreation area suitable for informal family activities and major organized events. As with most alternatives today, there are benefits, disbenefits, costs, and some savings. These have been estimated with the help of an external planning consultant and are identified in the table below. In each case, these are annualized over a 10-year planning horizon. Solve, a. Determine the B/C ratio for each project. Can you tell from these ratios which option should be selected? b. Determine which option should be selected using the incremental B/C ratio. c. Determine which option should be selected using B − C for each option. d. At what value of Option 2 costs are you indifferent between Option 1 and Option 2?