Fin 511 Financial Management <\/p>\n
Assignment (10 Points) \u2013 Due date December 4thth 2021<\/p>\n
A printing press company is considering buying one of two machines, X or Y; the respective costs and benefits of each are listed below:<\/p>\n
Annual Pre-tax<\/p>\n
Machine Cost Life of Machine Savings for Company<\/p>\n
X $100,000 4 years $56,000<\/p>\n
Y $125,000 5 years $60,000<\/p>\n
a. Calculate the after-tax cash flow for each machine. Assume, for ease of calculation, straight-line depreciation and no salvage value for either machine. The firm’s tax rate is 40 percent and its required rate of return is 16 percent.<\/p>\n
b. Calculate the NPV of each machine and the PI. Which would you select and why? <\/p>\n
A networking service company is examining two mutually exclusive projects. The probability distributions of annual cash inflows are presented below:<\/p>\n
PROJECT A PROJECT B<\/p>\n
Probability Cash Flow Probability Cash Flow<\/p>\n
0.25 $7,000 0.20 $5,000<\/p>\n
0.25 8,000 0.30 6,000<\/p>\n
0.25 9,000 0.30 7,000<\/p>\n
0.25 10,000 0.20 8,000<\/p>\n
What is the expected value and standard deviation of annual cash flows for each project? Which project’s cash flows appears riskier? <\/p>\n
3- The required rate of return on the bonds of the Exon Corporation is 12%. The firm’s beta coefficient is 1.2, the risk-free rate is 8%, and the required rate of return on stocks in general is 14%. If the firm’s marginal tax rate is 40%, and it will be financing projects with a 50-50 debt to equity mix, what its weighted average cost of capital?<\/p>\n
4- A laundry business is considering an investment project which will cost $1,000 and last for two years. The possible cash flows and their initial and conditional probabilities are given below:<\/p>\n
Year 1 Year 2<\/p>\n
Initial Cash Conditional Cash<\/p>\n
Probability Flow Probability Flow<\/p>\n
0.30 $800 0.50 $900<\/p>\n
0.50 $700<\/p>\n
————————————————–<\/p>\n
0.40 $500 0.25 $800<\/p>\n
0.50 $700<\/p>\n
0.25 $600<\/p>\n
————————————————–<\/p>\n
0.30 $200 0.60 $200<\/p>\n
0.40 $100<\/p>\n
If the risk-free rate is 4% and the company’s required rate of return is 10%, calculate the expected NPV for the project. What is the probability that Treasury securities would be a better investment? <\/p>\n
5- Novus company is considering the purchase of a new machine at a cost of $950,000, and expected to generate after-tax cash flows of $160,000 annually for the next 12 years. The firm has a weighted average cost of capital of 10 percent. The company plans to provide $250,000 from a new bond issue and $400,000 from a new stock issue. The balance of the financing would be provided internally by retaining earnings. The present value of the after-tax flotation costs on the debt issue will be 3 percent of the amount raised, while the common stock issue will carry flotation costs of 10 percent. Should the firm purchase the new machine?<\/p>\n
6- A metal company produces a particular item for $2.50 and sells it for $3. Fixed costs associated with the item are $10,000 a year. Suppose the company is contemplating the addition of a new piece of equipment to reduce manufacturing costs. Variable costs will be reduced to $2.25, but fixed costs will be increased by $2,000 a year. How will this proposed change in the manufacturing process influence the break-even point?<\/p>\n","protected":false},"excerpt":{"rendered":"
Fin 511 Financial Management Assignment (10 Points) \u2013 Due date December 4thth 2021 A printing press company is considering buying one of two machines, X or Y; the respective costs and benefits of each are listed below: Annual Pre-tax Machine Cost Life of Machine Savings for Company X $100,000 4 years $56,000 Y $125,000 5 […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[10],"class_list":["post-78669","post","type-post","status-publish","format-standard","hentry","category-research-paper-writing","tag-writing"],"_links":{"self":[{"href":"https:\/\/papersspot.com\/blog\/wp-json\/wp\/v2\/posts\/78669","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/papersspot.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/papersspot.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/papersspot.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/papersspot.com\/blog\/wp-json\/wp\/v2\/comments?post=78669"}],"version-history":[{"count":0,"href":"https:\/\/papersspot.com\/blog\/wp-json\/wp\/v2\/posts\/78669\/revisions"}],"wp:attachment":[{"href":"https:\/\/papersspot.com\/blog\/wp-json\/wp\/v2\/media?parent=78669"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/papersspot.com\/blog\/wp-json\/wp\/v2\/categories?post=78669"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/papersspot.com\/blog\/wp-json\/wp\/v2\/tags?post=78669"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}