1. A company would like to purchase a small technology firm for $5,000,000. The net cash flows from the small technology firm would be $2,000,000 per year in Years 1 & 2, then $1,000,000 per year in Years 3 through 5. After 5 years the patent of the small technology firm is estimated to be obsolete and the small-technology would not generate any net cash flows after Year 5. Should the company purchase the small technology firm?
d. Given your answer for part (c), in real terms how much must I put away each year to achieve my goal. Again, assume I put away the same (real) amount each year, the inflation rate is 5%, and I can
Capital Budgeting Case Study Name QRB 501 Date Instructor Name Capital Budgeting Study Case The purpose of this study is to understand Capital Budgeting and expenditures in Banking and how it is used. The intent is to answer questions such as the 5-year projected income statement, projected cash flow, Net Present Value (NPV), Internal Rate of Return (IRR) and which company to recommend acquiring based on the information given. We will look into these analysis to get a better understanding. 5 Year Projections Corporation B had higher expenses, depreciation and discount rate that corporation A. The tax rate was the same for both companies over a 5 year period.
Sample quiz 2: Fin 819 1. Super Computer Company's stock is selling for $100 per share today. It is expected that this stock will pay a dividend of 5 dollars per share, and then be sold for $120 per share at the end of one year. Calculate the expected rate of return for Super Computer Company ‘s stock. A) 20% B) 25% C) 10% D) 15% E) None of the above Answer: B Response: r = (120+5-100)/100 = 25% 2.
Explain your rationale. Answer: Loan: $8,100,000 APR: 9.2% Terms Of loan = 5 Years Months = 60 FV = $0 Monthly Payment (PMT) = $168,930 Air Jet made right Decision to get loan from Region Best because its monthly payment would be lower at $168,930 based on the APR of 9.2% compounded monthly. I agree with my decision, because based on high APR 9.2% and high loan amount, I get fair monthly payment. Task 2: Evaluating Competitor’s Stock AirJet Best Parts, Inc. is concerned regarding recent changes in its stock prices for the company and would like to determine the stock prices for key competitors. Key
Which one of the following is least apt to help convince managers to work in the best interest of the stockholders?pay raises based on length of service • implementation of a stock option plan • threat of a proxy fight • management compensation tied to the market value of the firm’s stock • threat of a takeover of the firm by unsatisfied stockholders 5. a. Compute the future value of $2,000 compounded annually for 20 years at 4 percent. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Future value $_________ b. Compute the future value of $2,000 compounded annually for 15 years at 10 percent. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Future value $_________ c. Compute the future value of $2,000 compounded annually for 25 years at 4
2. What was your estimate of WACC? What mistakes did Joanna Cohen make in her analysis? Which method is best for calculating the cost of equity? cost of equity =I used the 20 year at 5.74%+Geometric mean=5.9%x most recent beta .69=9.81% Cost of Debt I used Yield to maturity to find cost of debt From Exhibit 4 PV= 95.60 N=40 (20years x 2) since its paid semiannually Pmt=-3.375 (6.75/2) FV=-100 Comp I = 3.58% (semiannual) 7.16% (annual) After tax cost of debt = 7.16%(1-38%) = 4.44% E = market value of the firm's equity To find Market value of Equity you multiply share price by amount of shares $42.09x273.3= 11503.
Managerial Finance FI515_W5_Project 11 – 7 You have been asked by the president of your company to evaluate the proposed acquisition of a new spectrometer for the firm’s R&D department. The equipment’s basic price is $70,000, and it would cost another $15,000 to modify it for special use by your firm. The spectrometer, which falls into the MACRS 3-year class, would be sold after 3 years for $30,000. Use of the equipment would require an increase in net working capital (spare parts inventory) of $4,000. The spectrometer would have no effect on revenues, but it is expected to save the firm $25,000 per year in before-tax operating costs, mainly labor.
He projects that he will need to have $500,000 in 5 years in order to get the business off the ground. He has found an investment that will yield 12% interest compounded quarterly. How much will he need to invest today to have the amount he requires to start his practice? Part A: Table 6-2 Part B: 3% Part C: 20N Part D: PV = FV(IF) 500000(.55368) 276840 Problem 3: Elizabeth Corday is borrowing $20,000 at 11% over 6 years. She will make annual payments on the loan at the end of each year.
The financial planner should analyze your information to assess your current situation and determine what you must do to meet your goals. Depending on what services you have asked for, this could include analyzing your assets, liabilities and cash flow, current insurance coverage, investments or tax