You have been offered the following investment opportunity: if you invest $16,000 today, you will receive $4,000 two years from now, $7,000 four years from now, and $9,000 six years from now. a) What is the NPV of the opportunity if the interest rate is 6% per year? Should you take this opportunity? b) What is the NPV of the opportunity if the interest rate is 2% per year? Should you take this opportunity? .... Read More

Payback: Kathleen Dancewear Co. has bought some new machinery at a cost of $1,250,000. The impact of the new machinery will be felt in the additional annual cash flows of $375,000 over the next five years. What is the payback period for this project? If their acceptance period is three years, will this project be accepted? .... Read More

Financial Statement Analysis Our purpose this week: learning how to measure the performance of companies by analyzing their financial statements. Show us that you have read and understood the required readings, links and attached files - quote them where appropriate. Assignment: You are the assistant to the CEO of a major company. Your CEO keeps an eye on the competition, and asks you to do the following. Using ratio analysis, compare two major competitors in the same .... Read More

The Bravo Company just paid an annual dividend of $4.00 per share. Due to a need to conserve cash, the dividend in one year will be cut to zero. Dividends per share are forecasted to be $1.50 in two years, $2.50 in three years, and $3.50 in four years. After four years, dividends are expected to grow at a constant rate forever. Investors in Bravo Company require a return of 12%. The current market price of Bravoâ€™s stock is $30.66 per share. Determine the constant growth rate .... Read More

SerengetiCorp has five-year bonds outstanding that pay a coupon of 8.8 percent. If these bonds are priced at $1,064.86, what is the yield to maturity on these bonds? Assume semiannual coupon payments. What is the effective annual yield? .... Read More

Tomba Corporation had 300,000 shares of common stock outstanding on January 1, 2010. On May 1, Tomba issued 30,000 shares. (a) Compute the weighted-average number of shares outstanding if the 30,000 shares were issued for cash.(b) Compute the weighted-average number of shares outstanding if the 30,000 shares were issued in a stock dividend. .... Read More

EX 6-3 Perpetual inventory using FIFO Beginning inventory, purchases, and sales data for portable DVD players are as follows: April 1 Inventory 120 units at $39 6 Sale 90 units 14 Purchase 140 units at $40 19 Sale 110 units 25 Sale 45 units 30 Purchase 160 units at $43 The business maintains a perpetual inventory system, costing by the first-in, first-out method. a. Determine the cost of the merchandise sold for each sale and the inventory .... Read More

The Bartram-Pulley Company (BPC) must decide between two mutually exclusive investment projects. Each project costs $6,750 and has an expected life of 3 years. Annual net cash flows from each project begin 1 year after the initial investment is made and have the following probability distributions: Project A Project B Probability Net Cash Flows Probability Net Cash Flows 0.2$6,000 $6,000 .... Read More

The Scampini Supplies Company recently purchased a new delivery truck. The new truck cost $22,500, and it is expected to generate net after-tax operating cash flows, including depreciation, of $6,250 per year. The truck has a 5-year expected life. The expected salvage values after tax adjustments for the truck are given below. The company"s cost of capital is 10 percent. Year Annual Operating Cash Flow Salvage Value 0 ($22,500) .... Read More

Kim Hotels is interested in developing a new hotel in Seoul. The company estimates that the hotel would require an initial investment of $20 million. Kim expects that the hotel will produce positive cash flows of $3 million a year at the end of each of the next 20 years. The project"s cost of capital is 13 percent. a. What is the project"s net present value? b. While Kim expects the cash flows to be $3 million a year, it recognizes that the cash flows could, in fact, be much higher or .... Read More