ECN 203 Lecture Notes - Lecture 3: Preferred Stock, Dividend Discount Model, Dividend Yield
Get access
Related Questions
37.Use the following setup for the next question.
A manufacturing firm is deciding whether or not to invest in a new printer that needs an initial investment of $150,000. The investment would increase cash flows in the first year by $80,000 and in the second year by $75,000.
?If the interest rate is 10% then the net present value of the investment is
?a. $5,000 |
b. ?- $9,091 |
?c. -$15,290 |
d. | ?-$21,901 33. Table 13-16
|
1 Two sets of cash flows are shown in the table below. If these sets are equal at 8% interest rate, determine the unknown value, X.
2 A deposit of $10,000 now at a interest rate of 10% per year will accumulate in 20 years to an amount equal to _______________.
3 Which of the following relationships between compound interest factors is not correct?
4 What is the present worth of a series of ten deposits of $200 per year at 6% made at the end of each year?
5 Determine the net present worth (NPW) of the following cash flows using an interest rate of 7%.
A.$2,771.05 B.$2,500C.$1,500 D.$1,771.05 6 At Kal Tech Manufacturing Inc, the time required to make the first unit of an engineered product is 64.1 minutes. Determine the time required for 16th unit if the learning curve percentage is 90%.
7 A sum of $994.62 deposited at time |
1. Budgeting decisions. Which of those three methods ignores the time value of money?
Ā | a. |
Payback |
Ā | b. |
NPV |
Ā | c. |
IRR |
Ā | d. |
All of those methods ignore the time value of money - they are concerned with today's cash flow. |
2 points (Extra Credit)
2.
A firm is considering buying a new computer-controlled cut-off machine. It costs $50,000. It will provide cash flows (profits) of $15,000 for five years. The payback is:
Ā | a. |
1.5 years |
Ā | b. |
3.3 years |
Ā | c. |
5 years |
Ā | d. |
10 years |
2 points (Extra Credit)
3.
A firm is evaluating three capital projects (1, 2 & 3, I know real original!). Each project costs $25,000. The NPV for project 1 = $35,000; for project 2 the NPV is $15,000 and for project 3 the NPV is a negative $10,000.
The firm should:
Ā | a. |
Accept project 1, reject 2 & 3 |
Ā | b. |
Accept projects 1 & 2; reject 3 |
Ā | c. |
Accept project 3; reject 1 & 2 |
Ā | d. |
Reject all three |
2 points (Extra Credit)
4.
The firm has a cost of capital of 12%. Three projects are on the drawing board (A, B, & C). All are independent projects. . The IRRs of the three are respectively: 15%, 10%, -2%.
The firm should:
Ā | a. |
accept A; reject B & C |
Ā | b. |
Accept A & B; reject C |
Ā | c. |
Accept all three |
Ā | d. |
Reject all three |
2 points (Extra Credit)
5.
If the Net Present Value (NPV) is greater than the cost of capital, the project should be accepted.
True
False