Snowfall Level (in.) Financial Return > 40, 4 20-40, .2 $ 120,000 40,000 < 20, 4 -40,000

United Pigpen is considering a proposal to manufacture high-protein hog feed. The project would make use of an existing warehouse, which is currently rented out to a neighboring firm. The next year's rental charge on the warehouse is $125,000, and thereafter, the rent is expected to grow in line with inflation at 4% a year. In addition to using the warehouse, the proposal envisages an investment in plant and equipment of $1.35 million. This could be depreciated for tax purposes straight-line over 10 years. However, Pigpen expects to terminate the project at the end of 8 years and to resell the plant and equipment in year 8 for $450,000. Finally, the project requires an immediate Investment in working capital of $375,000. Thereafter, working capital is forecasted to be 10% of sales in each of years 1 through 7. Year 1 sales of hog feed are expected to be $4.70 million, and thereafter, sales are forecasted to grow by 5% a year, slightly faster than the inflation rate. Manufacturing costs…

United Pigpen (UP) is considering a proposal to manufacture high protein hog feed. The project would make use of an existing warehouse, which is currently rented out to a neighboring firm. The next year’s rental charge on the warehouse is $260,000, and thereafter the rent is expected to grow in line with inflation at 4% a year. In addition to using the warehouse, the proposal envisages an investment in plant and equipment of $3.1 million. This could be depreciated for tax purposes over 10 years. However, UP expects to terminate the project at the end of eight years and to resell the plant and equipment in year 8 for $1,040,000. Finally, the project requires an initial investment in working capital of $910,000. Thereafter, working capital is forecasted to be 10% of sales in each of years 1 through 7. Year 1 sales of hog feed are expected to be $10.9 million, and thereafter sales are forecasted to grow by 5% a year, slightly faster than the inflation rate. Manufacturing costs are…

A mining company is considering a new project. Because the mine has received a permit, the project would be legal; but it would cause significant harm to a nearby river. The firm could spend an additional $9.66 million at Year 0 to mitigate the environmental problem, but it would not be required to do so. Developing the mine (without mitigation) would require an initial outlay of $57 million, and the expected cash inflows would be $19 million per year for 5 years. If the firm does invest in mitigation, the annual inflows would be $20 million. The risk-adjusted WACC is 12%. a. Calculate the NPV and IRR with mitigation. Enter your answer for NPV in millions. For example, an answer of $10,550,000 should be entered as 10.55. Do not round intermediate calculations. Round your answers to two decimal places. NPV: $ IRR: % million Calculate the NPV and IRR without mitigation. Enter your answer for NPV in millions. For example, an answer of $10,550,000 should be entered as 10.55. Do not round…

A mining company is considering a new project. Because the mine has received a permit, the project would be legal; but it would cause significant harm to a nearby river. The firm could spend an additional $10 million at Year 0 to mitigate the environmental problem, but it would not be required to do so. Developing the mine (without mitigation) would require an initial outlay of $60 million, and the expected cash inflows would be $20 million per year for 5 years. If the firm does invest in mitigation, the annual inflows would be $21 million. The risk-adjusted WACC is 15%. Should this project be undertaken? 1. The project should not be undertaken under the "no mitigation" assumption. 2. The project should be undertaken only under the " no mitigation" assumption. 3. The project should not be undertaken under the "mitigation" assumption. 4. Even when mitigation is considered the project has a positive NPV, so it should be undertaken. 5. Even when mitigation is considered the project has a…

Temporary Housing Services Incorporated​ (THSI) is considering a project that involves setting up a temporary housing facility in an area recently damaged by a hurricane. THSI will lease space in this facility to various agencies and groups providing relief services to the area. THSI estimates that this project will initially cost $4 million to set up and will generate $20 million in revenues during its first and only year in operation​ (paid in one​ year). Operating expenses are expected to total $8 million during this year and depreciation expense will be another $2 million. THSI will require no working capital for this investment. ​ THSI's tax-rate is​ 20% Assume that​ THSI's cost of capital for this project is​ 15%. The net present value​ (NPV) of this temporary housing project is closest​ to:

A mining company is considering a new project. Because the mine has received a permit, the project would be legal; but it would cause significant harm to a nearby river. The firm could spend an additional $10 million at Year o to mitigate the environmental problem, but it would not be required to do so. Developing the mine (without mitigation) would require an initial outlay of $60 million, and the expected cash inflows would be $20 million per year for 5 years. If the firm does invest in mitigation, the annual inflows would be $21 million. The risk-adjusted WACC is 12%. a. Calculate the NPV and IRR with mitigation. Enter your answer for NPV in millions. For example, an answer of $10,550,000 should be entered as 10.55. Do not round intermediate calculations. Round your answers to two decimal places. NPV: $ million IRR: Calculate the NPV and IRR without mitigation. Enter your answer for NPV in millions. For example, an answer of $10,550,000 should be entered as 10.55. Do not round…

A commercial real estate developer plans to borrow money to finance an upscale mall in an exclusive area of the city. The developer plans to get a loan that will be repaid with uniform payments of $300,000 beginning in year 2 and ending in year 16. How much will a bank be willing to loan at an interest rate of 13% per year? The bank will be willing to loan the developer a sum of $

Mad Scientist, Inc. is considering investing into the nanotechnology business. After conducting a detailed due diligence process, the company's board decided that the current cost of entry into the nanotechnology business is too high. The board also thinks that the commercialization of technological advancements will eventually drive costs down and the company should get into the nanotech business one or two years from now, when they can realize a higher NPV on their investment. Given the above, the board has chosen the option to: Expand Abandon Delay

The Aubey Coffee Company is evaluating the within-plant distribution system for its new roasting, grinding, and packing plant. The two alternatives are (1) a conveyor system with a high initial cost but low annual operating costs and (2) several forklift trucks, which cost less but have considerably higher operating costs. The decision to construct the plant has already been made, and the choice here will have no effect on the overall revenues of the project. The cost of capital for the plant is 12%, and the projects' expected net costs are listed in the following table: a. What is the IRR of each alternative? The IRR of alternative 1 is -Select- Year 0 1 2 3 4 5 -Select- Expected Net Cost Forklift -$200,000 -160,000 -160,000 -160,000 -160,000 -160,000 Conveyor -$500,000 -120,000 -120,000 -120,000 -120,000 -20,000 The IRR of alternative 2 is-Select- b. What is the present value of costs of each alternative? Do not round Intermediate calculations. Round your answers to the nearest…