Chapter 5 principles of Corporate Finance :
The Titanic Shipbuilding Company has a noncancelable contract to build a small cargo vessel. Construction involves a cash outlay of $250,000 at the end of each of the next two years. At the end of the third year the company will receive payment of $650,000. Assume the IRR of this option exceeds the cost of capital.
The company can speed up construction by working an extra shift. In this case, there will be a cash outlay of $550,000 at the end of the first year, followed by a cash payment of $650,000 at the end of the second year. Use the IRR rule to show the (approximate) range of opportunity costs of capital at which the company should work the extra shift. (answers as a percent rounded to 2 decimal places )
The company should work the extra shift if the cost of capital is between _____% and _____%
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Chapter 5 principles of Corporate Finance : The Titanic Shipbuilding Company has a noncancelable contract to...
The Titanic Shipbuilding Company has a noncancelable contract to build a small cargo vessel. Construction involves a cash outlay of $262,000 at the end of each of the next two years. At the end of the third year the company will receive payment of $630,000. Assume the IRR of this option exceeds the cost of capital. The company can speed up construction by working an extra shift. In this case there will be a cash outlay of $570,000 at the...
The Titanic Shipbuilding Company has a noncancelable contract to build a small cargo vessel. Construction involves a cash outlay of $270,000 at the end of each of the next two years. At the end of the third year the company will receive payment of $638,000. Assume the IRR of this option exceeds the cost of capital The company can speed up construction by working an extra shift. In this case there will be a cash outlay of $590,000 at the...
The Titanic Shipbuilding Company has a noncancelable contract to build a small cargo vessel. Construction involves a cash outlay of $262,000 at the end of each of the next two years. At the end of the third year the company will receive payment of $630,000. Assume the IRR of this option exceeds the cost of capital. The company can speed up construction by working an extra shift. In this case there will be a cash outlay of $570,000 at the...
The Titanic Shipbuilding Company has a noncancelable contract to build a small cargo vessel. Construction involves a cash outlay of $270,000 at the end of each of the next two years. At the end of the third year the company will receive payment of $620,000. Assume the IRR of this option exceeds the cost of capital The company can speed up construction by working an extra shift. In this case, there will be a cash outlay of S584,000 te end...
2 1000 points value: The Titanic Shipbuilding Company has a noncancelable contract to build a small cargo vessel. Construction involves a cash outlay of $274,000 at the end of each of the next two years. At the end of the third year the company will receive payment of $635,000. Assume the IRR of this option exceeds the cost of capital The company can speed up construction by working an extra shift In this case, there will be a cash outlay...
1. You have the chance to participate in a project that produces the following cash flows: Cash Flows ($) C0 C1 C2 4,600 4,400 –10,800 a. The internal rate of return is 12.69%. If the opportunity cost of capital is 12%, what is the NPV of the project? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.) NPV $ __________. 2. Consider the following projects: Cash Flows...
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Case Study: Neptune Shipyard Company History: Neptune Shipyard is a shipyard operating on the River Clyde near Glasgow, Scotland in the form of a private company. It has a workforce of around 300, roughly divided into the following areas: Marketing 8, Accounting 22, Human Resources 12, Purchasing 8, Production 200. Production is divided into two departments: New Construction (shipbuilding) and Ship repair. Neptune Shipyard is a wholly owned subsidiary of regional shipping giant Jupiter Shipping PLC. The shipyard is considered...
6. A firm has a capital budget of $100 which must be spent on one of two projects, with any unspent balance being placed in a bank deposit earning 15%. Project A involves a present outlay of $100 and yields $321.76 after 5 years. Project B involves a present outlay of $40 and yields $92 after one year. Calculate: (i) the IRR of each project; (ii) the B/C ratio of each project, using a 15% discount rate. What are the...
The Frank Stone Company is considering the introduction of a new product. Generally, the company's products have a life of about 5 years, after which they are deleted from the range of products that the company sells. The new product requires the purchase of new equipment costing $4,000,000, including freight and installation charges. The useful life of the equipment is 5 years, with an estimated resale of equipment of $1,575,000 at the end of that period. The equipment will be...