work 3.pdf X + ork 3.pdf?target=4df5354f-43de-4868-bae8-6d46f03c0f7d 1. Stephen Owsu is deciding whether he should get into the MBA program at a state university or not. The tuition and books for this program will cost him $60,000. If he starts the MBA program, he has to give up his current position as a financial advisor at Edward Jones which pays him $42,000 a year (after tax). On average, an MBA graduates will make an extra $25.000 per year over a business career of 40 years. Stephen find his oportuity cost of capital to be 5%. Given this scenario, find the NET PRESENT VALUE of getting the MBA degree and discuss whether this is agood decision to take or not Also, think about other different factors that could affect this decision but do not factor in the NPV measure. MESDPOTAMA X Homework 3pdf + S/icsfs/Homework 3.pdf?target-4df5354f-43de-4868-bae8-6d46f03dof7d 2. IRR: Mutually exclusive projects Bell Manufacturing is attempting to choose the better of two mutually exclusive projects for expanding the firm's warehouse capac ity. The relevant cash flows for the projects are shown in the following table. The firm's cost of capital is 15%. Project X Project Y Initial invesment (CF) $500,000 $325,000 Year ( Cash inflows (CF S100,000 $140,000 120,000 120,000 1 50,000 95,000 190,000 70,000 250,000 50,000 a. Calculate the IKR tthe nesrest whole percent for each of the projects. s. Assess the acceptability t each project on the basis of the IRRS tound in part a. Which project. on this hasis, is prefcd? Unequal lives: ANPV approach JBL Co. has designed a new conveyor system. Man- agement must choose among three alternative courses of action: (1) The firm can sell the design outright to another corporation with payment over 2 years; (2) it can li- cense the design to another manufacturer for a period of 5 years, its likely product life; or (3) it can manufacture and market the system itself, an alternative that will result in 6 years of cash inflows. The company has a cost of capital of 12%. Cash flows associated with each alternative are as shown in the following table. 3. Alternative Sell License Manufacture Initial investment (CFo) -$200,000 -$200,000 -$450,000 Year (t) Cash inflows (CF) 1 $200,000 $250,000 $200,000 250,000 100,000 250,000 ,0) 200,000 000 200,000 200.000 000 OF 200,000 a. Calculate the net presenr talue of each alternative and rank the alrernatives on the basis of NPN b. Calculate the ammalited net present alue ANPVof each alrernative, and rank" them accordingy c Why is ANPV preterred over NPM when ranking projects with unequal Wves X rk 3.pdf k 3.pdf?target=4df5354f-43de-4868-bae8-6d46f03 c0f7d Risk-adjusted rates of return using CAPM Centennial Catering, Inc., is considering two mutually exclusive investments. The company wishes to use a CAPM-type risk- adjusted discount rate (RADR) in its analysis. Centennial's managers believe that the appropriate market rate of return is 12%, and they observe that the current risk-free rate of return is 7%. Cash flows associated with the two projects are shown in the following table. Project X Project Y Initial investment (CF) -$70,000 $78,000 Year (r) Cash inflows (CE) $30,000 000 22s 32,000 000 0 30.000 38,000 6000 Equation 11.5 to calculate the required project return for each.) b. Discuss your findings in part a, and recommend the preferred projecr. Cash budget: Advanced The actual sales and purchases for Xenocore, Inc., for Sep- tember and October 2015, along with its forecast sales and purchases for the period November 2015 through April 2016, follow. The firm makes 20% of all sales for cash and collects on 40% of its sales in each of the 2 months following the sale. Other cash inflows are expected to be $12,000 in September and April, $15,000 in January and March, and $27,000 in February. The firm pays cash for 10% of its purchases. It pays for 50% of its purchases in the following month and for 40% of its purchases 2 months later. Year Month Sales Purchases 2015 September $210,000 $120,000 2015 October November 250,000 150,000 2015 170,000 140,000 2015 December 160,000 100,000 2016 Nouary Feinuary 140,000 80,000 2016 180,000 110,000 2016 March 200,000 100,000 2016 April 250,000 90,000 Wages and salaries amount to 20% of the preceding month's sales. Rent of $20,000 per month must be paid. Interest payments of $10,000 are due in January and April. A principal payment of $.30.000 is also due in April. The firm expects to pay cash dividends of $20.000 in January and April. Taxes of $80,000 are due in April. The firm also intends to make a $25,000 cash purchase of fixed assets in December a. Assuming that the irm has a cash balance of $22,000 at the beginning of November, determine the end-of-month cash balances for each month, November through April. b. Assuming that thie n wishes to maintain a S15,000 minimum cash balance determine the resquirsd total financing or excess cash balance for each month. November throogh April. C If the firin were neqsiestoig a loe of credit to cover needed financing tor the period November to April, how larg wuld this line have ro he? Explain youur answer. X arget-4df5354f-43de-4868-bae8-6d46f03c0f7d Cash receipts A firm has actual sales of $65,000 in April and $60,000 in May. It expects sales of $70,000 in June and $100,000 in July and in August. Assuming that sales are the only source of cash inflows and that half of them are for cash and the remainder are collected evenly over the following 2 months, what are the firm's expected cash receipts for June, July, and August? 6