Fin 571 week 6 individual assignment homework problems

Get Custom Essay on Fin 571 week 6 individual assignment homework problems

Let Our Team of Pofessional Writers Take Care of Your Paper.

Complete the following problems. You should do this work in excel. A set of ungraded practice problems similar to the homework is provided in the week six material to help you do this assignment. 

 

Please post your answers in the classroom discussion section underneath the week six assignment.

 

1.  Net Present Value:  Johnson Complex Fabrications is a metal parts manufacturing company.  It has developed a new process for producing extruded aluminum tubing.  The process requires $1,968,450 initial investment.  It expected to have a life of five years and would produce net cash inflows for each of the next five years: year 1 $512,496; year 2 $242,637; year 3 $814,558; year 4 $887,225 and year 5 $712,642. 
What is the Net Present Value (NPV) if the discount rate is 15.9 percent?  (10 points)

 

2.  Free Cash Flow (FCF) and NPV for a project.  Daniels Agricultural Products is considering buying a new farm that it plans to operate for ten years. The farm will require an initial investment of 12 million dollars.  The investment will consist of 2 million dollars for land and 10 million dollars for trucks and other equipment.  The land, all trucks and all other equipment is expected to be sold at the end of ten years for a price of five million dollars, which is two million dollars above book value.  The farm is expected to produce revenue of 2 million dollars each year and annual cash flow from operations is projected to be 1.8 million dollars.  The marginal tax rate is 35 percent and the company’s required return or discount rate is 10 percent.  Calculate the NPV of this investment.   (10 points)

 

3.  Replace an existing asset:  Davis Plumbing is considering updating its current manual accounting system with a high end electronic system.  While the new accounting system would save the company money, the initial purchase cost of the system continues to decline.  The company’s opportunity cost of capital or discount rate is 10 percent.  The initial investment costs and annual savings made at different times in the future are shown below:   (10 points)

 

Year      Initial Investment      Savings per Year

0                   5,000                               7,000

1                   4,500                               7,000

2                   4,000                               7,000

3                   3,600                               7,000

4                   3,300                               7,000

5                   3,100                               7,000

 

When should Davis replace the system to have the highest present value of the NPV? (10 points)

 

4.   Scenario analysis:  Park City Boutique Brewery management forecasts that if the firm sells each case of Special Homebrewed for 20 dollars then the demand for the product will be 15,000 cases per year.  If they raised the price per case ten percent then they expect demand to fall to 90 percent of the expected sales at the current price of 20 dollars per case.   The firm’s variable cost per case is ten dollars and the total fixed cash costs for the year are 100,000 dollars.  Depreciation and amortization charges are 20,000 dollars and the firm has a 30 percent marginal tax rate.   Management anticipates it will need to increase working capital by 3,000 dollars for the year, regardless of the pricing of the product.  What will be the effect of the price increase on the firm’s free cash flow for the year?  (10 points)

 

5. WACC for a firm:  Acme Co. has a capital structure, based on current market values, that consists of 50 percent debt, 10 percent preferred stock and 40 percent common stock.  If the returns required by investors are 8 percent for the debt, 10 percent for the preferred stock and 15 percent for the common stock, what is Acme’s after tax weighted average cost of capital.  Assume that the firm’s marginal tax rate is 40 percent. (10 points)

Get 20% Discount on This Paper
Pages (550 words)
Approximate price: -

Try it now!

Get 20% Discount on This Paper

We'll send you the first draft for approval by at
Total price:
$0.00

How it works?

Follow these simple steps to get your paper done

Place your order

Fill in the order form and provide all details of your assignment.

Proceed with the payment

Choose the payment system that suits you most.

Receive the final file

Once your paper is ready, we will email it to you.

Our Services

Best Quality Essays has stood as the world’s leading custom essay writing services providers. Once you enter all the details in the order form under the place order button, the rest is up to us.

Essays

Essay Writing Services

At Best Quality Essays, we prioritize on all aspects that bring about a good grade such as impeccable grammar, proper structure, zero-plagiarism and conformance to guidelines. Our experienced team of writers will help you completed your essays and other assignments.

Admissions

Admission and Business Papers

Be assured that you’ll definitely get accepted to the Master’s level program at any university once you enter all the details in the order form. We won’t leave you here; we will also help you secure a good position in your aspired workplace by creating an outstanding resume or portfolio once you place an order.

Editing

Editing and Proofreading

Our skilled editing and writing team will help you restructure you paper, paraphrase, correct grammar and replace plagiarized sections on your paper just on time. The service is geared toward eliminating any mistakes and rather enhancing better quality.

Coursework

Technical papers

We have writers in almost all fields including the most technical fields. You don’t have to worry about the complexity of your paper. Simply enter as much details as possible in the place order section.