Wilson Co. is considering two mutually exclusive projects. Both require an initial investment of $10,000 at t = 0. Project X has an expected life of 2 years with after-tax cash inflows of $7,000 and $7,500 at the end of Years 1 and 2, respectively. In addition, Project X can be repeated at the end of Year 2 with no changes in its cash flows. Project Y has an expected life of 4 years with after-tax cash inflows of $5,600 at the end of each of the next 4 years. Each project has a WACC of 13%. What is the equivalent annual annuity of the most profitable project?
An investor bought 300 shares of Green International when it was selling for $40 a share and sold the shares one year later for $110.23. Green paid $2 per share in dividends. Calculate the investor’s rate of return.
Murray Company's bonds mature in 15 years, have a par value of $1,000, and pay an interest rate (coupon rate) of 5.5 percent annually. The market requires an interest rate of 7.2% on these bonds. What is the bond's price?
1. Equivalent Annual Annuity
2. Investors Rate of return = (Sale Value + Dividends - Purchase Value) / Purchase value
Investors Rate of return = (33069 + 600 - 12000) / 12000
Investors Rate of return = 21669 / 12000
Investors Rate of return = 180.58%
3. Bond Price = Coupon * PVAF(7.2%, 15) + Maturity * PVF ( 7.2%, 15)
Bond Price = 55 * 8.9940 + 1000 * 0.35243
Bond Price = $847.70
Wilson Co. is considering two mutually exclusive projects. Both require an initial investment of $10,000 at...
Mulroney Corp. is considering two mutually exclusive projects. Both require an initial investment of $10,000, and their risks are average for the firm. Project X has an expected life of 2 years with after-tax cash inflows of $6,000 and $8,000 at the end of Years 1 and 2, respectively. Project Y has an expected life of 4 years with after-tax cash inflows of $4,000 at the end of each of the next 4 years. The firm
13. Problem 12.13 (Unequal Lives) eBook Haley's Crockett Designs Inc. is considering two mutually exclusive projects. Both projects require an initial investment of $11,000 and are typical average-risk projects for the firm. Project A has an expected life of 2 years with after-tax cash inflows of $6,000 and $10,000 at the end of Years 1 and 2, respectively. Project B has an expected life of 4 years with after-tax cash inflows of $5,000 at the end of each of the...
Newfoundland Vintners Co-operative is considering two mutually exclusive projects: Absinth and Brandy. Project Absinth requires a $20,000 cash outlay today and is expected to generate after-tax cash flows of $11,000 in year 1, $8,500 in year 2, and $7,500 in year 3. Project Brandy requires a $30,000 cash outlay today and is expected to generate after-tax cash flows of $7,000 in year 1, $9,000 in year 2, $11,000 in year 3, and $16,000 in year 4. Neither project can be...
Viena is considering tuo mdually urdusive projeds Both require an initial investment of $11,000, and their risks are average for the firm. Project X has an expede. 2 years with its tax cash rows of $5,000 and 58 785 at the end of Years 1 and 2 respectively, Project Y has an expected life of 4 years with after- as chrowd54758 a be end of each di the next 4 years. The firm's WACC is 9200%. Determine the equivalent annual...
(b) A company is evaluating between two mutually exclusive projects. The required initial investments and the expected net cash flows from the projects are as follows: Project 1 Project 2 0 -$4,000,000 - $4,000,000 1 $1,900,000 $1,100,000 2 $2,255,000 $1,900,000 3 $2,000,000 $2,000,000 The company accepts any project for which the payback period is within 3 years, Which of these projects should be chosen using the payback period as the capital budgeting measure? (3 marks) An Australian multinational company is...
4- Shell Camping Gear Inc. is considering two mutually exclusive projects. Each requires an initial investment (CF) of $100,000. John Shell, president of the company, has set a maximum payback period of 4 years. The after-tax cash inflows associated with each project are shown in the following table. Cash inflows (CF) Year Project A Project B 1 S10.000 S40.000 2 20.000 30.000 3 30.000 20.000 4 40.000 10.000 5 20.000 20.000 a. Determine the payback period of each project. b....
(Risk-adjusted NPV) The Hokie Corporation is considering two mutually exclusive projects. Both require an initial outlay of $12,000 and wil operate for 8 years Project A will produce expected cash flows of $8,000 per year for years 1 through 8, whereas project will produce expected cash flows of 9,000 per year for years through 8. Because project B is the riskler of the two projects, the management of Hokie Corporation has decided to apply a required rate of return of...
(Risk-adjusted NPV)The Hokie Corporation is considering two mutually exclusive projects. Both require an initial outlay of $10,000 and will operate for 7 years. Project A will produce expected cash flows of $5,000 per year for years 1 through 7, whereas project B will produce expected cash flows of $6,000 per year for years 1 through 7. Because project B is the riskier of the two projects, the management of Hokie Corporation has decided to apply a required rate of return...
You are comparing two mutually exclusive projects. Both projects have an initial cost of $43,500 . Project A has cash inflows of $24,500 , $21,500 , and $18,500 over the next 3 years, respectively. Project B has cash inflows of $13,500 , $16,900 and $39,500 over the next 3 years. What is the crossover rate for Projects A and B? 19.54 percent 20.56 percent 20.30 percent 18.83 percent
Kuhn Co. is considering a new project that will require an initial investment of $20 million. It has a target capital structure of 35% debt, 2% preferred stock, and 63% common equity. Kuhn has noncallable bonds outstanding that mature in five years with a face value of $1,000, an annual coupon rate of 10%, and a market price of $1,050.76. The yield on the company's current bonds is a good approximation of the yield on any new bonds that it...