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I have attached the questions . Thank you. please as discussed there is a time limit of 2 and half hours thank you 1.Thompson &
I have attached the questions . Thank you. please as discussed there is a time limit of 2 and half hours thank you
1.Thompson & Son has been busy analyzing a new product. It has determined that an operating cash flow of $16,700 will result in a zero net present value, which is a company requirement for project acceptance. The fixed costs are $12,378 and the contribution margin is $6.20. The company feels that it can realistically capture 10% of the 50,000 unit market for this product. Should the company develop the new product? Why or why not? Yes; because 5,000 units of sales exceeds the quantity required for a zero net present value Yes; because the internal break-even point is less than 5,000 units No; because the firm cannot generate sufficient sales to obtain at least a zero net present value No; because the project has an expected internal rate of return of negative 100% No; because the project will not pay back on a discounted basis 2.Otto Enterprises has a 15-year bond issue outstanding that pays a 9% coupon. The bond is currently priced at $894.60 and has a par value of $1,000. Interest is paid semiannually. What is the yield to maturity? 3.An investment with an initial cost of $14,000 produces cash flows of $4,000 annually for 5 years. If the cash flow is evenly spread out over the year and the firm can borrow at 10%, the discounted payback period is _____ years. 4.You would like to invest in the following project. Camille, your boss, insists that only projects that can return at least $1.10 in today's dollars for every $1 invested can be accepted. She also insists on applying a 10% discount rate to all cash flows. Based on these criteria, you should: accept the project because it returns almost $1.22 for every $1 invested. accept the project because it has a positive PI. accept the project because the NPV is $2,851. reject the project because the PI is 1.05. reject the project because the IRR exceeds 10%. 5.You are considering the following two mutually exclusive projects that will not be repeated. The required rate of return is 11.25% for project A and 10.75% for project B. Which project should you accept and why? project A; because its NPV is about $335 more than the NPV of project B. project A; because it has the higher required rate of return. project B; because it has the largest total cash inflow. project B; because it returns all its cash flows within two years. project B; because it is the largest sized project. 6.You are scheduled to receive annual payments of $10,000 for each of the next 25 years. Your discount rate is 8.5%. What is the difference in the present value if you receive these payments at the beginning of each year rather than at the end of each year? 7.Margarite's Enterprises is considering a new project. The project will require $325,000 for new fixed assets, $160,000 for additional inventory and $35,000 for additional accounts receivable. Short-term debt is expected to increase by $100,000 and long-term debt is expected to increase by $300,000. The project has a 5-year life. The fixed assets will be depreciated straight-line to a zero book value over the life of the project. At the end of the project, the fixed assets can be sold for 25% of their original cost. The net working capital returns to its original level at the end of the project. The project is expected to generate annual sales of $554,000 and costs of $430,000. The tax rate is 35% and the required rate of return is 15%. What is the amount of the earnings before interest and taxes for the first year of this project? 8.What is the future value of investing $3,000 for 3/4 year at a continuously compounded rate of 12%? $3,163 $3,263 $3,283 $3,287 $3,317 9.Wilson's Antiques is considering a project that has an initial cost today of $10,000. The project has a two-year life with cash inflows of $6,500 a year. Should Wilson's decide to wait one year to commence this project, the initial cost will increase by 5% and the cash inflows will increase to $7,500 a year. What is the value of the option to wait if the applicable discount rate is 10%? 10.Aspens is preparing a bond offering with an 8% coupon rate. The bonds will be repaid in 10 years. The company plans to issue the bonds at par value and pay interest semiannually. Given this, which of the following statements are correct? I. The initial selling price of each bond will be $1,000. II. After the bonds have been outstanding for 1 year, you should use 9 as the number of compounding periods when calculating the market value of the bond. III. Each interest payment per bond will be $40. IV. The yield to maturity when the bonds are first issued is 8%. I and II only II and III only II, III, and IV only I, II, and III only I, III, and IV only 11.You just purchased some equipment that is classified as 5-year property for MACRS. The equipment cost $67,600. What will the book value of this equipment be at the end of three years should you decide to resell the equipment at that point in timeStep by Step Solution
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