Questions from Corporate Finance

Q: A project requires an initial investment of $100,000 and

A project requires an initial investment of $100,000 and is expected to produce a cash inflow before tax of $26,000 per year for five years. Company A has substantial accumulated tax losses and is...

Q: Construct a new version of Table 4.7, assuming that

Construct a new version of Table 4.7, assuming that competition drives down profitability (on existing assets as well as new investment) to 11.5% in year 6, 11% in year 7, 10.5% in year 8,...

Q: Consider the following two mutually exclusive projects: / a

Consider the following two mutually exclusive projects: a. Calculate the NPV of each project for discount rates of 0%, 10%, and 20%. Plot these on a graph with NPV on the vertical axis and disco...

Q: Go to the Excel spreadsheet versions of Tables 6.1,

Go to the Excel spreadsheet versions of Tables 6.1, 6.5, and 6.6 and answer the following questions. a. How does the guano project’s NPV change if IM&C is forced to use the seven-year MACRS tax...

Q: A widget manufacturer currently produces 200,000 units a year.

A widget manufacturer currently produces 200,000 units a year. It buys widget lids from an outside supplier at a price of $2 a lid. The plant manager believes that it would be cheaper to make these li...

Q: A machine costs $380,000 and is expected to

A machine costs $380,000 and is expected to produce the following cash flows:
If the cost of capital is 12%, what is the machine’s NPV?

Q: If the cost of capital is 9%, what is the PV

If the cost of capital is 9%, what is the PV of $374 paid in year 9?

Q: Reliable Electric is considering a proposal to manufacture a new type of

Reliable Electric is considering a proposal to manufacture a new type of industrial electric motor that would replace most of its existing product line. A research breakthrough has given Reliable a tw...

Q: Marsha Jones has bought a used Mercedes horse transporter for her Connecticut

Marsha Jones has bought a used Mercedes horse transporter for her Connecticut estate. It cost $35,000. The object is to save on horse transporter rentals. Marsha had been renting a transporter every o...

Q: a. If the one-year discount factor is .905

a. If the one-year discount factor is .905, what is the one-year interest rate? b. If the two-year interest rate is 10.5%, what is the two-year discount factor? c. Given these one- and two-year disc...