Finance Answers

ABCcompany is considering a capital investment for which initial outlay is 500,000 and has estimated life of five years with a zero salvage value, ignoring depreciation, the machine produced following cash flows:- in year 1, $70,000, in year 2, 60,000, in year 3, 50,000, in year 4, 60,000, in year 5, 70,000 compute NPV and pay back period, discount rate is 8%, interprete your finding.

2 Cost of Preferred Stock. Micro Spinoffs also has preferred stock outstanding. The stock
pays a dividend of $4 per share, and the stock sells for $40. What is the cost of preferred
stock?
3. Calculating WACC. Suppose Micro Spinoffs’s cost of equity is 12.5 percent. What is its
WACC if equity is 50 percent, preferred stock is 20 percent, and debt is 30 percent of total
capital?

Farrelly enterprises has fixed operating cost of $500,000, variable operating cost per unit of $20 and a selling price of $40. The firm's capital structure consists of $600,000 loan at 10% interest, 10,000 shares of preferred stock paying an annual dividend of $3 per share and $50,000 shares of common stock outstanding. Farrelly has a 34% tax rate. Calculator Farrelly operating breakeven point in units and in dollar sales

A 30-year maturity bond with face value of $1,000 makes annual coupon payments and has a coupon rate of 8%. What is the bond's yield to maturity if the bond is selling for $1,100?

abc company is considering a capital investment for which initial outlay is 500,000 and has estimated life of five years with a zero salvage value, ignoring depreciation, the machine produced following cash flows:- in year 1, $70,000, in year 2, 60,000, in year 3, 50,000, in year 4, 60,000, in year 5, 70,000 compute NPV and pay back period, discount rate is 8%, interprete your finding

A forklift will last for only 3 more years. It costs $5,000 a year to maintain. For $20,000 you can buy a new lift that can last for 10 years and should require maintenance costs of only $2,000 a year.

If the discount rate is 5 percent per year, should you replace the forklift?

What if the discount rate is 12 percent per year? Why does your answer change?

Robert Ryan General manger Chicago stars professional football team is currently negotiating a new contract with Ronnie smith, the team's star running back. Under league rules smith is now a free agent, which means that he is free to negotiate a contract with any other team in the league. Smith has presented Ryan with a final contract demand consisting of alternatives for a five year contract. If Ryan does not agree to one of these, smith will sign contract with another team. The alternative contract demands are:
A) A $2000, 000 bonus payment immediately, a payment of 500,000 dollars at the end of each of the next five years, and a deferred payment of 1000,000 at the end of fifth year of the contract.
B) A $500,000 bonus payment immediately, a payment of 300,000 dollars at the end of each of the next five years, and a deferred payment of 200,000 each payable at the end of years 11 through 20.
Ryan has determined that smith's value to the team over the next five years is about 3000,000 dollars (in terms of present value of additional revenue from gate receipts and television discounted at 12% per year) should Ryan accept one of smith's contract demands, if so, which one? Explain fully.

The following data were obtained from a survey of college students. The variable X represents the number of non-assigned books read during the past six months.
x
x
0
1
2
3
4
5
P (X=x)
0.20
0.25
0.20
0.15
0.10
0.10

Find P( X > 1)
A.0.20
B.0.80
C.0.55
D.0.45

A random variable X is normally distributed with a mean of 175 and a standard deviation of 50. Given that X = 150, its corresponding Z- score is –0.50.

true or false

You are considering the purchase of two different insurance annuities. Annuity A will pay you $16,000 at the beginning of each year for 8 years. Annuity B will pay you $12,000 at the end of each year for 12 years. Assuming your money is worth 7%, and each costs you $75,000 today, which would you prefer?