What is the payback period for the following set of cash flows? (Round your answer to 2 decimal places. (e.g., 32.16))

Year Cash Flow

0 –$ 5,700

1 1,350

2 1,550

3 1,950

4 1,450

Payback period years

2.value:

5.00 points

An investment project provides cash inflows of $720 per year for eight years. What is the project payback period if the initial cost is $1,925? What if the initial cost is $3,750? What if it is $5,800?

What is the project payback period if the initial cost is $1,925? (Enter 0 if the project never pays back. Round your answer to 2 decimal places. (e.g., 32.16))

Payback period years

What is the project payback period if the initial cost is $3,750? (Enter 0 if the project never pays back. Round your answer to 2 decimal places. (e.g., 32.16))

Payback period years

What is the project payback period if the initial cost is $5,800? (Enter 0 if the project never pays back. Round your answer to 2 decimal places. (e.g., 32.16))

Payback period years

3.value:

5.00 points

Buy Coastal, Inc., imposes a payback cutoff of three years for its international investment projects.

Year Cash Flow (A) Cash Flow (B)

0 –$ 68,000 –$ 78,000

1 27,000 19,000

2 36,000 22,000

3 25,000 34,000

4 12,000 238,000

What is the payback period for both projects? (Round your answers to 2 decimal places. (e.g., 32.16))

Payback period

Project A years

Project B years

Which project should the company accept?

Project A

Project B

4.value:

5.00 points

An investment project has annual cash inflows of $3,800, $4,700, $5,900, and $5,100, and a discount rate of 14 percent.

What is the discounted payback period for these cash flows if the initial cost is $6,500? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Discounted payback period years

What is the discounted payback period for these cash flows if the initial cost is $8,600? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Discounted payback period years

What is the discounted payback period for these cash flows if the initial cost is $11,600? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Discounted payback period years

5.value:

5.00 points

An investment project costs $10,000 and has annual cash flows of $2,940 for six years.

What is the discounted payback period if the discount rate is zero percent? (Enter 0 if the project never pays back. Round your answer to 2 decimal places. (e.g., 32.16))

Discounted payback period years

What is the discounted payback period if the discount rate is 6 percent? (Enter 0 if the project never pays back. Round your answer to 2 decimal places. (e.g., 32.16))

Discounted payback period years

What is the discounted payback period if the discount rate is 20 percent? (Enter 0 if the project never pays back. Round your answer to 2 decimal places. (e.g., 32.16))

Discounted payback period years

6.value:

5.00 points

A firm evaluates all of its projects by applying the IRR rule. A project under consideration has the following cash flows:

Year Cash Flow

0 –$ 27,400

1 11,400

2 14,400

3 10,400

If the required return is 16 percent, what is the IRR for this project? (Round your answer to 2 decimal places. (e.g., 32.16))

IRR %

Should the firm accept the following project?

Yes

No

7.value:

5.00 points

A firm evaluates all of its projects by applying the NPV decision rule. A project under consideration has the following cash flows:

Year Cash Flow

0 –$ 28,900

1 12,900

2 15,900

3 11,900

What is the NPV for the project if the required return is 11 percent? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

NPV $

At a required return of 11 percent, should the firm accept this project?

Yes

No

What is the NPV for the project if the required return is 25 percent? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

NPV $

At a required return of 25 percent, should the firm accept this project?

Yes

No

8.value:

5.00 points

A project that provides annual cash flows of $16,300 for eight years costs $69,000 today.

What is the NPV for the project if the required return is 7 percent? (Round your answer to 2 decimal places. (e.g., 32.16))

NPV $

At a required return of 7 percent, should the firm accept this project?

Accept

Reject

What is the NPV for the project if the required return is 19 percent? (Negative amount should be indicated by a minus sign. Round your answer to 2 decimal places. (e.g., 32.16))

NPV $

At a required return of 19 percent, should the firm accept this project?

Accept

Reject

At what discount rate would you be indifferent between accepting the project and rejecting it? (Round your answer to 2 decimal places. (e.g., 32.16))

Discount rate %

9.value:

5.00 points

What is the IRR of the following set of cash flows? (Round your answer to 2 decimal places. (e.g., 32.16))

Year Cash Flow

0 –$ 15,800

1 6,500

2 7,800

3 6,300

IRR %

10.value:

5.00 points

A project has the following cash flows:

Year Cash Flow

0 –$ 15,900

1 6,600

2 7,900

3 6,400

What is the NPV at a discount rate of zero percent?

NPV $

What is the NPV at a discount rate of 10 percent? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

NPV $

What is the NPV at a discount rate of 19 percent? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

NPV $

What is the NPV at a discount rate of 30 percent? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

NPV $

11.value:

5.00 points

Garage, Inc., has identified the following two mutually exclusive projects:

Year Cash Flow (A) Cash Flow (B)

0 –$ 29,700 –$ 29,700

1 15,100 4,650

2 13,000 10,150

3 9,550 15,900

4 5,450 17,500

a-1

What is the IRR for each of these projects? (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16))

IRR

Project A %

Project B %

a-2 Using the IRR decision rule, which project should the company accept?

Project A

Project B

a-3 Is this decision necessarily correct?

Yes

No

b-1

If the required return is 12 percent, what is the NPV for each of these projects? (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16))

NPV

Project A $

Project B $

b-2 Which project will the company choose if it applies the NPV decision rule?

Project A

Project B

c.

At what discount rate would the company be indifferent between these two projects? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Discount rate %

12.value:

5.00 points

Consider the following two mutually exclusive projects:

Year Cash Flow (X) Cash Flow (Y)

0 –$ 20,300 –$ 20,300

1 8,925 10,250

2 9,250 7,875

3 8,875 8,775

Calculate the IRR for each project. (Round your answers to 2 decimal places. (e.g., 32.16)).

IRR

Project X %

Project Y %

What is the crossover rate for these two projects? (Round your answer to 2 decimal places. (e.g., 32.16)).

Crossover rate %

What is the NPV of Projects X and Y at discount rates of 0%, 15%, and 25%? (Negative amount should be indicated by a minus sign. Round your answers to 2 decimal places. (e.g., 32.16))

Discount rate Project X Project Y

0% $ $

15% $ $

25% $ $

13.value:

5.00 points

Light Sweet Petroleum, Inc., is trying to evaluate a generation project with the following cash flows:

Year Cash Flow

0 –$ 38,600,000

1 62,600,000

2 – 11,600,000

a-1

What is the NPV for the project if the company requires a return of 11 percent? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

NPV $

a-2 Should the firm accept this project?

Yes

No

b- This project has two IRR’s, namely _____?____ percent and _____?______percent, in order from smallest to largest. (Note: If you can only compute one IRR value, you should input that amount into both answer boxes in order to obtain some credit.) (Negative amount should be indicated by a minus sign. Round your answers to 2 decimal places. (e.g., 32.16))

14.value:

5.00 points

Year Cash Flow

0 –$ 17,100

1 9,400

2 8,300

3 4,800

What is the profitability index for the set of cash flows if the relevant discount rate is 11 percent? (Do not round intermediate calculations and round your final answer to 3 decimal places. (e.g., 32.161))

Profitability index

What is the profitability index for the set of cash flows if the relevant discount rate is 16 percent? (Do not round intermediate calculations and round your final answer to 3 decimal places. (e.g., 32.161))

Profitability index

What is the profitability index for the set of cash flows if the relevant discount rate is 23 percent? (Do not round intermediate calculations and round your final answer to 3 decimal places. (e.g., 32.161))

Profitability index

15.value:

5.00 points

The Angry Bird Corporation is trying to choose between the following two mutually exclusive design projects:

Year Cash Flow (I) Cash Flow (II)

0 –$ 73,000 –$ 17,100

1 33,000 9,250

2 33,000 9,250

3 33,000 9,250

a-1

If the required return is 11 percent, what is the profitability index for both projects? (Round your answers to 3 decimal places. (e.g., 32.161))

Profitability Index

Project I

Project II

a-2 If the company applies the profitability index decision rule, which project should the firm accept?

Project I

Project Il

b-1

What is the NPV for both projects? (Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places. (e.g., 32.16))

NPV

Project I $

Project II $

b-2 If the company applies the NPV decision rule, which project should it take?

Project I

Project II

16.value:

5.00 points

Consider the following two mutually exclusive projects:

Year Cash Flow (A) Cash Flow (B)

0 –$ 347,000 –$ 49,500

1 48,000 24,300

2 68,000 22,300

3 68,000 19,800

4 443,000 14,900

Whichever project you choose, if any, you require a 15 percent return on your investment.

a-1

What is the payback period for each project? (Round your answers to 2 decimal places. (e.g., 32.16))

Project A_____ years

Project B _____years

a-2 If you apply the payback criterion, which investment will you choose?

Project A

Project B

b-1 What is the discounted payback period for each project? (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16))

Project A____years

Project B_____years

b-2 If you apply the discounted payback criterion, which investment will you choose?

Project A

Project B

c-1 What is the NPV for each project? (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16))

Project A $______

Project B $______

c-2 If you apply the NPV criterion, which investment will you

choose?

Project A

Project B

d-1 What is the IRR for each project? (Round your answers to 2 decimal places. (e.g., 32.16))

Project A_____

Project B_____

d-2 If you apply the IRR criterion, which investment will you

choose?

Project A

Project B

e-1 What is the profitability index for each project? (Do not round intermediate calculations and round your final answers to 3 decimal places. (e.g., 32.161))

Project A_____

Project B_____

17.value:

5.00 points

An investment has an installed cost of $525,800. The cash flows over the four-year life of the investment are projected to be $223,850, $240,450, $207,110, and $155,820.

If the discount rate is zero, what is the NPV?

NPV $

If the discount rate is infinite, what is the NPV? (Negative amount should be indicated by a minus sign.)

NPV $

At what discount rate is the NPV just equal to zero? (Round your answer to 2 decimal places. (e.g., 32.16))

IRR %

18.value:

5.00 points

Slow Ride Corp. is evaluating a project with the following cash flows:

Year Cash Flow

0 –$ 29,400

1 11,600

2 14,300

3 16,200

4 13,300

5 – 9,800

The company uses an interest rate of 8 percent on all of its projects.

Calculate the MIRR of the project using the discounting approach method. (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

MIRR %

Calculate the MIRR of the project using the reinvestment approach method. (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

MIRR %

Calculate the MIRR of the project using the combination approach method. (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

MIRR %

19.value:

5.00 points

Slow Ride Corp. is evaluating a project with the following cash flows:

Year Cash Flow

0 –$ 28,700

1 10,900

2 13,600

3 15,500

4 12,600

5 – 9,100

The company uses a discount rate of 12 percent and a reinvestment rate of 7 percent on all of its projects.

Calculate the MIRR of the project using the discounting approach method. (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

MIRR %

Calculate the MIRR of the project using the reinvestment approach method. (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

MIRR %

Calculate the MIRR of the project using the combination approach method. (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

MIRR %

20.value:

5.00 points

Anderson International Limited is evaluating a project in Erewhon. The project will create the following cash flows:

Year Cash Flow

0 –$ 1,260,000

1 435,000

2 500,000

3 395,000

4 350,000

All cash flows will occur in Erewhon and are expressed in dollars. In an attempt to improve its economy, the Erewhonian government has declared that all cash flows created by a foreign company are “blocked” and must be reinvested with the government for one year. The reinvestment rate for these funds is 3 percent.

If Anderson uses a required return of 12 percent on this project, what are the NPV and IRR of the project? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16))

NPV $

IRR %

2-4) Talbot Enterprises recently reported an EBITDA of $8 million and net income of $2.4 million. It had $ 2.0 million of interest expense, and its corporate tax rate was 40%. What was its charge for depreciation and amortization?

3-11) Complete the balance sheet and sales information in the table that follows for J. White Industries using the following financial data: Total assets turnover: 1.5 Gross profit margin on sales: (sales – Cost of goods sold) / Sales = 25% Total liabilities-to-assets ratio: 40% Quick ratio: 0.80 Days sales outstanding (based on 365-day year): 36.5 days Inventory turnover ratio: 3.75

Partial Income Statement information

Sales ?

Cost of goods Sold ?

Balance Income

Cash ? Accounts Payable ?

Accounts receivable ? Long-term debt $50,000

Inventories ? Common Stock ?

Fixed assets ? Retained earnings ?

Total assets $400,000 Total Liabilities and equity ???

4-8) You want to buy a car, and a local bank will lend you $20,000. The loan would be fully amortized over 5 years (60 months), and the nominal interest rate would be 12%, with interest paid monthly. What is the monthly loan payment? What is the loan’s EFF%?

5-9) The Garraty Company has two bond issues outstanding. Both bonds pay $100 annual interest plus $1000 at maturity. Bond 1, has a maturity of 15 years, and Bond S has a maturity of 1 year.

a) What will the value be of each of these bonds when the going rate of interest is (1) 5%, (2) 8%, (3) 12%? Assume that there is only one more interest payment to be made on Bond S.

b) Why does the longer-term (15 year) bond fluctuate more when interest rates change than does the shorter-term bond (1 year)?

6-6)The market and Stock J have the following probability distributions:

Probability Rm Rj

0.3 15% 20%

0.4 9 5

0.3 18 12

a) Calculate the expected rates of return for the market and Stock J.

b) Calculate the standard deviations for the market and Stock J.

6-8)As an equity analyst you are concerned with what will happen to the required return to Universal Toddle Industries’s stock as market conditions change. Suppose rrf = 5%, rm = 12 % and B UTI = 1.4

a. Under current conditions, what is r uti, the required rate of return on UTI stock?

b. Now suppose rrf (1) increases to 6% or (2) decreases to 4%. The slope of the SML remains constant. How would this affect rm and r uti?

c. Now assume rrf remains at 5% but rm (1) increases to 14% or (2) falls to 11%. The slope of the SML does not remain constant. How would these changes affect R uti?

7-17) Kendra Enterprises has never paid a dividend. Free cash flow is projected to be $80,000 and $100,000 for the next 2 years, respectively; after the second year, FCF is expected to grow at a constant rate of 8%. The company’s weighted average cost of capital is 12%.

a. What is the terminal, or horizon, value of operations? (Hint: find the value of all free cash flows beyond year 2 discounted back to year 2).

b. Calculate the value of Kendra’s operations.

8-3)Assume that you have been given the following information on Purcell Industries:

Current stock price = $ 15 Strike price of option = $15

Time to maturity of option = 6 months Risk-free rate = 6%

Variance of stock return = 0.12

d1 = 0.24495 N(d1) = 0.59675

d2 = 0.00000 N(d2) = 0.50000

According to the Black-Scholes option pricing model, what is the option’s values?

9-7) Shi Importers’s balance sheet shows $300 million in debt, $50 million in preferred stock, and $250 million in total common equity. Shi’s tax rate is 40%, rd = 6%, rps = 5.8%, and rs = 12%. If Shi has a target capital structure of 30% debt, 5% preferred stock, and 65% common stock, what is its WACC?

9-11) RadonHomes’s current EPS is $6.50. It was $4.42, 5 years ago. The company pays out 40% of its earnings as dividends, and the stock sells for $36.00.

a) Calculate the historical growth rate in earnings. (hint: this is a 5-year growth period).

b) Calculate the next expected dividend per share, D1. (hint: D0 = 0.4($6.50 = $2.60). Assume that the past growth rate will continue.

c) What is Radon’s cost of equity, rs?

12-2) Refer to problem 12-1. What would be the additional funds needed if the company’s year end 2013 assets had been $7 million? Assume that all other numbers, including sales, are the same as in Problem 12-1 and that the company is operating at full capacity. Why is the AFN different from the one you found in Problem 12-1? Is the company’s “capital intensity” ratio the same or different?

From historical data, Harry’s Car Wash estimates that dirty cars arrive at the rate of 10 per hour all day Saturday. With a crew working the wash line, Harry figures that cars can be cleaned at the rate of one every 5 minutes. One car at a time is cleaned in this exampldepe of a single-channel waiting line.
Assuming Poisson arrivals and exponential service times, find the
a.) Average number of cars in line.
b.) Average time a car waits before it is washed.
c.) Average time a car spends in the service system.
d.) Utilization rate of the car wash.
e.) Probability that no cars are in the system.

The Schmeddley Discount Department Store has approximately 300 customers shopping in its store between 9 A.M. and 5 P.M. on Saturdays. In deciding how many cash registers to keep open each Saturday. Schmedley’s manager considers two factors: customer waiting time (and the associated waiting cost) and the service costs of employing additional checkout clerks. Checkout clerks are paid an average of $8 per hour. When only one is on duty, the waiting time per customer is about 10 minutes (or 1/6 hour); when two clerks are on duty, the average checkout time is 6 minutes per person; 4 minutes when three clerks are working; and 3 minutes when four clerks are on duty.
Schmedley’s management has conducted customer satisfaction surveys and has been able to estimate that the store suffers approximately $10 in lost sales and goodwill for every hour of customer time spent waiting in checkout lines. Using the information provided, determine the optimal number of clerks to have on duty each Saturday to minimize the store’s total expected cost.

3. Ashley’s Department Store in Kansas City maintains a successful catalog sales department in which a clerk takes orders by telephone. If the clerk is occupied on one line, incoming phone calls to the catalog department are answered automatically by a recording machine asked to wait. As soon as the clerk is free, the party that has waited the longest is transferred and answered first. Calls come in at a rate of about 12 per hour. The clerk is capable of taking an order in an average of 4 minutes. Calls come in at a rate of about 12 per hour. The clerk is capable of taking an order in an average of 4 minutes. Calls tend to follow a Poisson distribution, and service times tend to be exponential. The clerk is paid $10 per hour, but because of lost goodwill and sales, Ashley’s loses about $50 per hour of customer time spent waiting for the clerk to take an order.
a. What is the average time that catalog customers must wait before their calls are transferred to the order clerk?
b. What is the average number of callers waiting to place an order?
c. Ashley’s is considering adding a second clerk to take calls. The store would pay that person the same $10 per hour. Should it hire another clerk? Explain