Questions from Financial Management

Q: Bagel Pantry Inc. is considering two mutually exclusive projects with widely

Bagel Pantry Inc. is considering two mutually exclusive projects with widely differing lives. The company's cost of capital is 12%. The project cash flows are summarized as follows: a. Compare the...

Q: Callaway Associates, Inc. is considering the following mutually exclusive projects

Callaway Associates, Inc. is considering the following mutually exclusive projects. Callaway’s Cost of capital is 12%. a. Calculate each project’s NPV and IRR. b...

Q: Discuss the idea of capitalizing a stream of earnings in perpetuity.

Discuss the idea of capitalizing a stream of earnings in perpetuity. Where is this idea useful? Is there a financial asset that makes use of this idea?

Q: The Catseye Marble Co. is thinking of replacing a manual production

The Catseye Marble Co. is thinking of replacing a manual production process with a machine. The manual process requires three relatively unskilled workers and a supervisor. Each worker makes $17,500...

Q: Blackstone Inc manufactures western boots and saddles. The company is considering

Blackstone Inc manufactures western boots and saddles. The company is considering replacing an outmoded leather-processing machine with a new, more efficient model. The old machine was purchased for...

Q: The Rapscallion Company’s stock is selling for $43.75.

The Rapscallion Company’s stock is selling for $43.75. Dave Jones has done some research on the firm and its industry, and thinks it will pay dividends of $5 next year and $7 the following year. Aft...

Q: Tomatoes Inc. is planning a project that involves machinery purchases of

Tomatoes Inc. is planning a project that involves machinery purchases of $100,000. The new equipment will be depreciated over five years, straight line. It will replace old machinery that will be so...

Q: Should the project being considered in the previous problem be accepted or

Should the project being considered in the previous problem be accepted or rejected based on IRR? (Hint: Start by guessing 11% for IRR) Does the IRR method seem to give a more definite result? If so,...

Q: Resolve the previous problem assuming Voxland uses the 5-year Modified

Resolve the previous problem assuming Voxland uses the 5-year Modified Accelerated Cost Recovery System (MACRS) with no salvage value to depreciate the computer. Continue to assume the machine is sol...

Q: Calculate the NPV at 12% and the IRR for the following

Calculate the NPV at 12% and the IRR for the following projects. Find IRR's to the nearest whole percent. a. An initial outflow of $10,000 followed by three inflows of $4,000. b. An initial outflow...