Your factory has been offered a contract to produce a part for a new printer. The contract would last for 3 years and your cash flows from the contract would million per year. Your upfront setup costs to be ready to produce the part would be $7.81 million. Your discount rate for this contract is 8.4%. a. What does the NPV rule say you should do?

Your factory has been offered a contract to produce a part for a new printer. The contract would last for 3 years and your cash flows from the contract would million per year. Your upfront setup costs to be ready to produce the part would be $7.81 million. Your discount rate for this contract is 8.4%. a. What does the NPV rule say you should do?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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You have just been offered an opportunity to buy a working daily farm in lowa .The seller shows you financial statements that suggest the investment will provide a cash flow of $80,000 per year .If you assume the farm can operate indefinitely, and you require a 12.8% return on the investment, what is the most you would be willing to pay for the farm.
3.You have the opportunity to make a one-time sale if you will give a new customer 30days to pay. You suspect there is a 15 percent chance this person will never pay you. The sales price of the item the customer wants to buy is $289. Your variable cost on that item is $156 and your monthly interest rate is 1.75percent. Should you grant credit to this customer? Why or why not?
Please provide complete solution.
You have been given a choice of paying $20,000 for a new GM car with a $3,000 cash rebate (net cost of $17,000 which you finance separately), or zero percent financing for 48 months with no cash rebate. What is the implicit rate of interest in this deal?
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NUBD Inc. is considering two average-risk alternative ways of producing its patented polo shirts. Process X has a cost of P8,000 and will produce net cash flows of P5,000 per year for 2 years. Process Y will cost P11,500 and will produce cash flows of P4,000 per year for 4 years. The company has a contract that requires it to produce the shirts for 4 years, but the patent will expire after 4 years, so the shirts will not be produced after 4 years. Inflation is expected to be zero during the next 4 years. If cash inflows occur at the end of each year, and if NUBD's cost of capital is 10 percent, by what amount will the better project increase NUBD's value? *
3. Your biotech firm plans to buy a new DNA sequencer for $500,000. The seller requires that you pay 20% of the purchase price as a down payment and is willing to finance the remainder by offering a 48-month loan with equal monthly payments and an interest rate of 0.5% per month. What is the monthly loan payment?
4
Boeing makes a product for airplane travel. The startup cost of the product to customers is 12887. The product costs about 1200 per year to operate. The expected life of the product is 4 years. Airbus also makes a similar device. Its startup cost is 11450. The product costs 2076 per year to operate. The expected life of the product is 4 years. What is the EVC of each product? How much more/less should the customers be willing to pay for Boeing's product?
Your factory has been offered a contract to produce a part for a new printer. The contract would last for three years, and your cash flows from the contract would be $5.17 million per year. Your upfront setup costs to be ready to produce the part would be $8.17 million. Your discount rate for this contract is 8.3% a. What does the NPV rule say you should do? b. If you take the contract, what will be the change in the value of your firm?
You need to buy a new laundry center with a price of $ 22,000 because the one you had no longer works and has no repair, at the moment you do not have the cash available to buy it, so you went to a department store to buy it on credit, The store offers you to pay for the laundry center in 24 months with an annual rate of 17%. What is the amount you will have to pay monthly? Note: Step by step to get to the result, do not skip anything.Note2: If it can be done in excel it is better
You are contemplating on purchasing a new motorcycle. Kangaroo Autos and Turtle Motors are both offering your preferred motorcycle brand at a price of P120,000. To entice customers, Kangaroo Autos is giving a P5,000 discount for cash payment. On the other hand, Turtle Motors is offering a monthly installment of P5,000 at the end of each month in the next 24 months. If the cost of capital is 24%, which company is offering a better deal? (Just indicate the present value of your choice in the answer field)

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