Question 1

A company is considering two alternative methods of producing a new product.The relevant data concerning the alternatives are presented below.  At the end of the useful life of whatever equipment is chosen the product will be discontinued.The company's tax rate is 50 percent and its cost of capital is 10 percent.
a.Calculate the net present value of each alternative.
b.Calculate the benefit cost ratio for each alternative.
c.Calculate the internal rate of return for each alternative.
d.If the company is not under capital rationing,which alternative should be chosen?
 Why?

Accepted Answer

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Question 2

Consider the following investment opportunity.  Assume the annual figures are unchanged for the expected life of the investment.What is the rate of return on this investment?

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Question 3

Your brother,age 40,is the regional manager at an office supply company.He thinks he might want to leave his job to go back to school for an MBA.He expects that his current job,if he were to stay at it,would pay him a real income stream of $75,000 per year until retirement at age 65.If he goes back to school,he would forego two years of income,but his real income after graduation would be $110,000 per year until retirement at age 65.He has been accepted to an MBA program that costs a real $22,000 per year.If his real opportunity cost is 8 percent,would leaving his job to get an MBA be a smart financial decision?

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Question 4

Ten years ago you invested $1,000 for 10 shares of Steeze,Inc.common stock.You sold the shares recently for $2,000.While you owned the stock it paid $10.08 per share in annual dividends.What was your rate of return on Steeze stock?

Accepted Answer

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Question 5

Given the following information about a possible average-risk,new product investment,calculate the investment's net present value.

Accepted Answer

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Quiz 7: Discounted Cash Flow Techniques

Consider the following investment opportunity. Assume the annual figures are unchanged for the expected life of the investment.What is the rate of return on this investment?

Ten years ago you invested $1,000 for 10 shares of Steeze,Inc.common stock.You sold the shares recently for $2,000.While you owned the stock it paid $10.08 per share in annual dividends.What was your rate of return on Steeze stock?

Given the following information about a possible average-risk,new product investment,calculate the investment's net present value.