Harris Seafood Question Number One (1) Value the processing plant proposal. Ignore the Industrial Revenue Bond financing. Assume: Market Risk Premium 8.8%‚ Riskless Rate 11.41%‚ and Harris Long Term Debt Rate 13.5%. Our approach to valuing the processing plant can easily be decomposed into three distinct steps first‚ find the value of the foreseeable free cash flows. Next‚ calculate the terminal value of the project. Finally‚ take the present value of those flows. The next few paragraphs walk
Premium Net present value Cash flow Free cash flow
the end of Year 2. Describe your answer for each item below in complete sentences‚ whenever it is necessary. Show all of your calculations and processes for the following points: a. Assuming the opportunity interest rate is 8%‚ what is the present value of the second alternative mentioned above? Which of the two alternatives should be chosen and why? b. How would your decision change if the opportunity interest rate is 12%? c. Provide a description of a scenario where this kind of decision between
Premium Risk Net present value Money
Example 14.3: Yield to Maturity Suppose an 8% coupon‚ 30year bond is selling at 1‚276.76 what average rate of return would be earned by an investor purchasing the bond at this price? We find the interest rate at which the present value of the remaining 60 semiannual payments equal the bond price. This is the rate consistent with the observed price of the bond. Therefore‚ we solve for r in the following equation: [pic] 1‚276.76 = [pic] $40 + $1000
Premium Time value of money Finance Bond
the book value of each share of common stock? (b) is the stock overvalued or undervalued in the marketplace? (c) what might be the reason(s) for your answer in (b). (a) (b) overvalued (c) market value of the assets is greater than the book value. 2. A firm has current assets of $800‚000‚ which can be liquidated at 90 percent of book value. Total liabilities‚ including preferred stock‚ equal $270‚000. The firm has 15‚000 shares of common stock outstanding. What is the liquidation value per share
Premium Investment Stock Balance sheet
for a fee. We have compared the two options to determine which marketing strategy would be in the best interest of Glaxo Italia in terms of net present value‚ rather than the IRR or payback period used previously. We have decided that co-marketing with another company would be the best option for Glaxo Italia as it has the higher net present value. Forecasting and Analysis We have decided to extend the forecasts to 2010 because although it is difficult to predict beyond 6 years‚ the typical
Premium Net present value Time value of money Marketing
consider is whether the loan is due now or later The concept of amortization is applicable if the loan or financial obligation due now Finding the Size of Each Payment The size of the periodic payment to settle a debt is highly dependent on the time the payment is made. For ordinary annuity ? ?=? 1 − 1 + ? −? For annuity due ? ?=? 1 − 1 + ? −? 1 + ? For deferred annuity ? 1+? ? ?=? 1 − 1 + ? −? Example The cash price of a shopping equipment was P 120‚000. Alex bought it with a down payment
Premium Interest Money Time value of money
Course Description This course applies quantitative reasoning skills to business problems. Students learn to analyze data using a variety of analytical tools and techniques. Other topics include formulas‚ visual representation of quantities‚ time value of money‚ and measures of uncertainty. Policies Faculty and students/learners will be held responsible for understanding and adhering to all policies contained within the following two documents: • University policies: You must be logged
Premium Time value of money Regression analysis Time series
Indicators • What ratios are used for measuring profitability‚ efficiency‚ liquidity and leverage? 7 Key topics: Value Chapter 5: The Time Value of Money • Why is there a time value of money? • How can we calculate future from present values and vice versa? • What are annuities & perpetuities? • How can we calculate the present value of annuities & perpetuities? 8 Key topics: Value Chapter 6: Valuing Bonds
Premium Corporate finance Investment Finance
On Day 1 you receive market buy orders for 10‚000 shares and market sell orders for 4‚000 shares. How much do you earn on the 4‚000 shares that you bought and sold? What is the value of your inventory at the end of the day? (Hints: It is possible to have negative inventory. Further‚ there is more than one correct way to value an inventory‚ but please state what assumption your valuation is based on.) I buy 4000 shares at the price of 102 ¼‚ for which the total cost is $409‚000. I sell the inventory
Premium Compound interest Investment Bond
CPT EFF3. QKL Co. plans a new project that will generate $ 265‚000 of cash flow at the end of each year for 7 years and additionally $167‚000 at the end of the project. If the continuously compounded rate of interest is 8%‚ estimate the present value of the cash flows. a. 1‚097‚567.12 b. 1‚271‚062.87 c. 1‚515‚761.89 d. 1‚459‚704.54 e. None of the above Solution: The answer is D. !"#‚!!! !!! !!∗!.!" ! !.!"!! +167‚000 ∗ � !!∗!.!" = 1‚459‚704.54 4. Sandra decides to set up a retirement
Free Compound interest Time value of money Interest