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Answer: Payback method
Payback period is useful in evaluating liquidity of a project
because it is used to determine the time period in which the
initial investment will be recovered.
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For an initial investment of $10,000, you are offered the opportunity to receive $4,000 at the end of the year for the next 10 years. What is the irr of this opportunity? $16,840 o need to know the cost of capital O 38.45% O 8%
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Which of the following companies has the lowest after tax cost of debt. Company Market Cost of Debt Tax Bracket 10% 0.35 9% 0.2 12% 0.28 OB O A and B oc Ο Α
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What is the present value of a $2000, 10 year, annual ordinary annuity at a 4% annual discount rate (round to nearest dollar) 1351 18,422 O 16,222 O 249,122
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What is the WACC of a company with the following capitalization. The company is in the 33% tax bracket, and floatation costs add 1.2% from the firm's perspective. Allocation Market Cost/ Expected Return Debt 5.5% 0.3 0.4 9.4% Retained Earnings Common Stock (new issue) 10.6% O 7.69% 08.05% O Not enough information
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The required return on retained earnings is 13%. The risk free rate is 2% and the Market Return is 9.5%. What is the company's beta? (hint: consider the CAPM) 0.47 O Cannot tell O 1.47 1.73
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Set this up carefully. You found a 2009 Toyota 4-Runner on sale for $22,311. The dealership says it will finance the entire amount with a one year loan. You will need to make monthly payments of $1,924. What is the ANNUALIZED interest rate on this loan. 8.6% O.97% 0.53% 6.37%
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NPV ensures that: we generate cash the most efficiently for our investors O we choose the greatest wealth creating opportunity for our investors Owe minimize the time to get wealthy for our investors o we choose the lowest risk opportunity for our investors
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Set this up carefully. You found a 2009 Toyota 4-Runner on sale for $22,311. The dealership says it will finance the entire amount with a one year loan. You will need to make monthly payments of $1,924. What is the ANNUALIZED interest rate on this loan. 8.6% .97% 53% 6.37%
We have examined five basic methods for evaluating the financial profitability of a single project: PW, AW, FW, IRR, and ERR. These methods lead to the use of simple decision rules for economic evaluation of projects. Discuss the two supplemental methods for assessing a project's liquidity: the simple payback period and the discounted payback period. Pick one and describe what the advantages and disadvantages would be in comparison to the other option.
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1 Solvent Prepreg -$ 775,000 Dry Prepreg -$1,750,e00 1,105,000 910,000 755,000 Year 400,000 650,e00 400,000 3 nts a. What is the payback period for each project? (Do not round intermediate celculations and round your answers to 2 decimal places, e.g., 32.16.) Payback period 1.66 years Dry Prepreg 2.13 years Solvent Prepreg b. What is the NPV for each project? (Do not round intermediate calculations and...