Assignment 9 Estimating Cash Flows
Due date: November 20, 2011 Instruction: Please submit your assignment as an attachment by midnight on the due date

Solve all problems in the Excel file provided.
Problem 1 . Regency Integrated Chips (RIC), a large Nashville-based technology company is evaluating a new project to manufacture a new chip. a. b. The project’s estimated economic life is 5 years. RIC’s marketing vice-president believes that annual sales would be 30,000 units if the units were priced at $3,000 each. RIC expects no growth in unit sales, and it believes that the unit price will rise by 2 percent each year. c. The engineering department has reported that the project will require additional manufacturing space, and RIC currently has an option to purchase an existing building, at a cost of $10 million, which would meet this need. The building would be bought and paid for on December 31, 2008, and for depreciation purposes, it would fall into the MACRS 39- year class. The annual depreciation rate for the five years of economic life of the project would be: Year 1 1.3% Year 2 2.6% Year 3 2.6% Year 4 2.6% Year 5 2.6%

d.

The necessary equipment would be purchased and installed in late 2008, and it would also be paid for on December 31, 2008. The equipment would fall into the MACRS 5-year class, and it would cost $5 million, including transportation and installation. The annual depreciation rate for the five years of economic life of the project would be: Year 1 Year 2 Year 3 Year 4 Year 5

20%

32%

19%

12%

11%

e.

At the end of the project, the building is expected to have a market value of $5 million and the equipment is expected to have a market value of $1 million.

f.

The production department has estimated that variable manufacturing costs would be $2000 per unit, and that fixed overhead costs, excluding depreciation would be $10 million a year. They expect variable costs to rise by 2 percent per year, and fixed costs to...

...washer, dryer, etc.) in your apartment. You face the following choices: (i) Purchase all appliances at the store using a bank loan. There is no down payment as the bank can take your appliances if you default on the loan. The loan is at the annual market rate of 5%, and the loan amount is $6,000 to be repaid monthly over 4 years.(ii) Rent-to-buy from the same store. The monthly rental is $125 for 48 months and then you pay $1,000 to own all the appliances. What is...

...20% of the purchase price in each of the next 4 years. If you pay the entire bill immediately, you can take a 5% discount from the purchase price. |
a. | Calculate the present value of the payments, if you can borrow or lend funds at a 7% interest rate. Assume the product sells for $100. (Do not round intermediate calculations. Round your answer to 2 decimal places.) |
Present value | $ |
b. | Calculate the payment net of discount. |
Payment net of discount | $ ...

...Chapter 5 : Interet rates
Page161
Interest rate quotes and adjustments
5-1. Your bank is offering you an account that will pay 20% interest in total for a two-year deposit. Determine the equivalent discount rate for a period length of
a. Six months.
b. One year.
c. One month.
a. Since 6 months is [pic] of 2 years, using our rule [pic]
So the equivalent 6 month rate is 4.66%.
b. Since one year is half of 2...

...INTEREST RATES
a 6. The interest rate expressed in terms of the interest payment made each period is called the _____ rate.
a. stated interest
b. compound interest
c. effective annual
d. periodic interest
e. daily interest
EFFECTIVE ANNUALRATE
c 7. The interest rate expressed as if it were compounded once per year is called the _____ rate.
a. stated interest
b....

...received any aid on this examination.________________
HELPFUL FORMULAS , , , , 1 , 1 , , 1 1 , , , , 1 1 , 1 1 1 1 1
1
1
2 ,
1. Given an interest rate of 7.3 percent per year, what is the value at date t = 7 of a perpetual stream of $2,100 annual payments that begins at date t = 15?
2100 0.073
1 1.073
17,567.03
2. You’ve just joined the investment banking firm of Dewey, Cheatum, Howe. They’ve...

...Annual Report 2012
Caring for the world, one person at a time…
inspires and unites the people of
Johnson & Johnson.
ON THE COVER:
Michelle, an employee with the Johnson & Johnson Family of
Companies, enjoys time with her young daughter, Alexis, while
grandmother, Jacqueline, looks on. Johnson & Johnson helps people
all over the world care for the health and well-being of those they
love, and to live longer, healthier, happier lives.
Scan this QR code to view
a...

...for obliging the ‘TERM PAPER’.
Sir,
With due respect, beg to focus your kind attention with the following fact that as requirement of the BBA Programme I had visited many clients of some MFIs to collect the information regarding their interest rates of microfinance activities. Also I have collected a huge amount of secondary data, including videos & documentaries to understand whether the effective interest of the MFIs in Bangladesh are rational enough to provide the...

...An Essay
on
Interest Rate Behavior and Lending in Microfinance
Abstract: This essay analyzes factors which affect interest rate behavior and its subsequent impact on lending in microfinance. Here we have used regression model for our analysis. Furthermore comparison has been drawn among the different sources of loans outside Bangladesh. Here the experience of microfinance outside Bangladesh like India, South and South-East Asia, Latin America has been fully...