NET PRESENT‚ VALUE‚ MERGERS AND ACQUISTIONS TRIDENT UNIVERSITY INTERNATIONAL AVIE MARIE JOHNSTONE STRATEGIC CORPORATE FINANCE FIN501 MODULE 5 CASE ASSIGNMENT PROFESSOR WALTER WITHAM
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TUTORIAL DAY AND TIME______________________________________________ INSTRUCTIONS: TIME ALLOWED: 90 MINUTES WRITING TIME AND 5 MINUTES READING TIME • CLOSED BOOK TEST • ANSWER ALL 3 QUESTIONS (AND IN THE SPACES PROVIDED) • A FORMULA SHEET IS INCLUDED AT THE BACK OFFICE USE ONLY QUESTION 1 2 3 TOTAL (OUT OF 60) MARK Question 1 (30 Marks) This question consists of 15 multiple-choice questions. For each multiplechoice question‚ choose the one correct answer from the four
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opportunity? 100 120 Year 1 100 140 Phase-2 Year 2 Year 3 NPV (Phase 1) = -100 + 120 / (1+0.3) = -7.6 CAPACITY PLANNING Phase-1 Year 0 Investment Revenue Use a 30% per year discount rate. b. How much would Project Sable be worth if you had to choose today‚ once and for all‚ whether or not to invest also in Phase 2? 100 120 Year 1 100 140 Phase-2 Year 2 Year 3 NPV (Phase 1) = -100 + 120 / (1+0.3) = -7.6 NPV (Phase 2) = -100/(1+0.3)2 + 140 / (1+0.3)3 = 4.55 Total NPV = -7.6 + 4.55 = -3.04 CAPACITY
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Time Value of Money Exercise 1. If you invest $1000 today at an interest rate of 10% per year‚ how much will you have 20 years from now‚ assuming no withdrawals in interim? 2. a. If you invest $100 every year from the next 20 years starting one year from today and you earn interest of 10% per year‚ how much will you have at the end of the 20 years? b. How much must you invest each year if you want to have $50000 at the end of the 20 years? 3. What is the present value of the following
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that can be significant in determining when to use the present value or internal rate of return methods. Under the net present value method‚ cash flows are assumed to be reinvested at the firm ’s weighted average cost of capital Points earned on this question: 1 Question 2 (Worth 1 points) A project has initial costs of $3‚000 and subsequent cash inflows in years 1 – 4 of $1350‚ 275‚ 875‚ and 1525. The company ’s cost of capital is 10%. Calculate IRR for this project. 10.00%
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opportunity to invest in her friend’s clothing store. The initial investment is $10‚000 and her expected cashflows are as follows: Year 1: $300 Year 2: $500 Year 3: $1200 Year 4: $2000 Year 5: $2000 Year 6: $5000 Year 7: $5000 What is Juanita’s IRR on this investment?(No more than two decimals in the percentage interest rate‚ but do not enter the % sign.) 3.Austin needs to purchase a new heating/cooling system for his home. He is thinking about having a geothermal system installed‚ but he wants to know how
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1. If you deposit $1‚500 today‚ how much will you have in 3 years‚ given that interest is 9%‚ compounded monthly 2. You just won $150‚000 scholarship. What is the value of this scholarship if the payment wil be made of $50‚000 per year for the next 2 years‚ followed by payments of $25‚000 per year for the next two years. The appropriate interest rate is 8% per year 3. A level-coupon bond has par value of $1‚000 that pays $120 per year and has 10 years to maturity. If the yield for similar
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Cash flows 1 2500 2 2500 3 2500 4 2500 5 2500 6 2500 Calculate Pay Back Period (PBP) When the cash flows are not uniform 1. There are two Proposals. Proposal A and Proposal B. Both cost the amount of $ 60‚000. The discount rate is 10%. The cash flows before depreciation and tax are as follows: Year Proposal A Proposal B $ $ 0 (60‚000) (60‚000) 1 18‚000 19‚000 2 15‚000 17‚000 3 18‚000 19‚000 4 16‚000
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_______________ 1. What is the net present value of a project with the following cash flows if the discount rate is 14 percent? [pic] A. -$3‚140.43 B. -$929.90 C. $247.181 D. $1‚027.67 E. $1‚127.08 2. Timothy is considering an investment of $10‚000. This investment is supposedly going to provide him with cash inflows of $2‚500 in the first year and $6‚000 a year for the following 2 years. At a discount rate of zero percent this investment has a net present value (NPV) of _____‚ but at
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1. Basic present value calculations Calculate the present value of the following cash flows‚ rounding to the nearest dollar: a. A single cash inflow of $12‚000 in five years‚ discounted at a 12% rate of return. b. An annual receipt of $16‚000 over the next 12 years‚ discounted at a 14% rate of return. c. A single receipt of $15‚000 at the end of Year 1 followed by a single receipt of $10‚000 at the end of Year 3. The company has a 10% rate of return. d. An annual receipt of $8‚000 for three
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