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Question;61. Use the appropriate factors from Table;6-4 or Table 6-5 to answer the following questions.;(a.) What is the present value of $90,000;to be received in six years using a discount rate of 12%?;(b.) How much should be invested today at a;return on investment of 16% compounded annually to have $150,000 in eleven;years?;62. Use the appropriate factors from Table;6-2 or Table 6-3 to answer the following questions.;(a.) Vincent Co.'s common stock is expected;to have a dividend of $7 per share for each of the next five years, and it is;estimated that the market value per share will be $65 at the end of five years.;If an investor requires a return on investment of 14%, what is the maximum;price the investor would be willing to pay for a share of Vincent Co. common;stock today?;(b.) Aliyana bought a bond with a face;amount of $1,000, a stated interest rate of 14%, and a maturity date 20 years;in the future for $990. The bond pays interest on a semi-annual basis. Eight;years have gone by and the market interest rate is now 12%. What is the market;value of the bond today?;63. The following data have been collected;by capital budgeting analysts at Condel Brothers Oil Co. concerning the;drilling and production of known reserves at an off-shore location;(a.) Calculate the net present value of the;proposed investment in the drilling and production operation. Ignore income;taxes, and round answers to the nearest $1.;(b.) What will the internal rate of return;on this investment be relative to the cost of capital (higher, lower, or the;same)? Explain your answer.;64. Macy Co. is considering the investment;of $86,000 in a new machine. The machine will generate cash flow of $18,500 per;year for each year of its six-year life and will have a salvage value of $5,000;at the end of its life. Macy Co.'s cost of capital is 10 percent.;(a.) Calculate the net present value of the;proposed investment. Ignore income taxes, and round all answers to the nearest;$1.;(b.) What will the internal rate of return;on this investment be relative to the cost of capital (higher, lower, or the;same)? Explain your answer.;65. The following data have been collected;by capital budgeting analysts at Erica, Inc. concerning a new product line;currently under consideration by management;(a.) Calculate the net present value of the;proposed investment in the new product line. Ignore income taxes, and round all;answers to the nearest $1.;(b.) What will the internal rate of return;on this investment be relative to the cost of capital (higher, lower, or the;same)? Explain your answer.;66. Delta, Inc. is considering the;investment of $75,000 in a new machine. The machine will generate cash flow of;$16,800 per year for each year of its seven-year life and will have a salvage;value of $12,000 at the end of its life. Delta Inc.'s cost of capital is 14%;percent.;(a.) Calculate the net present value of the;proposed investment. Ignore income taxes, and round all answers to the nearest;$1.;(b.) What will the internal rate of return;on this investment be relative to the cost of capital (higher, lower, or the;same)? Explain your answer.;67. Lynn Co. is considering the investment;of $90,000 in a new machine. The machine will generate cash flow of $10,000 per;year for each year of its 15 year life and will have a salvage value of $5,000;at the end of its life. Lynn Co.'s cost of capital is 8%.;(a.) Calculate the net present value of the;proposed investment. Ignore income taxes, and round all answers to the nearest;$1.;(b.) Calculate the present value ratio of;the investment.;(c.) What will the internal rate of return;on this investment be relative to the cost of capital (higher, lower, or the;same)? Explain your answer.;(d.) Calculate the payback period of the;investment.;68. The following data have been collected;by capital budgeting analysts at Halda, Inc. concerning an investment in an;expansion of the company's product line. Analysts estimate that an investment;of $210,000 will be required to initiate the project at the beginning of 2010.;Estimated cash returns from the new product line are summarized in the;following table, assume that the returns will be received in a lump sum at the;end of each year.;The new product line will also require an;investment in working capital of $30,000, this investment will become available;for other purposes at the end of the project. Salvage value of machinery and;equipment at the end of the product line's life is expected to be $20,000. The;cost of capital used in Hilda, Inc.'s capital budgeting analysis is 10%.;(a.) Calculate the net present value of the;proposed investment. Ignore income taxes, and round all answers to the nearest;$1.;(b.) Calculate the present value ratio of;the investment.;(c.) What will the internal rate of return;on this investment be relative to the cost of capital (higher, lower, or the;same)? Explain your answer.;(d.) Calculate the payback period of the;investment.;69. Digital Devices, Inc. has received a;special order to manufacture 10,000 CD ROM drives for an Italian computer;manufacturer. Digital determines that the order will not affect its current;domestic sales of CD ROM drives and because of the special nature of the order no;sales commission would be paid. However, to process the order for export, an;additional handling cost of $10 per unit is estimated. The order indicates that;the price of the drives cannot exceed $200.;The company has the capacity to produce;100,000 units annually but is currently operating at 75% of available capacity.;Unit selling price and costs, based on estimated actual capacity being;utilized, are as follows;(a.) Prepare a relevant cost analysis;showing the effect on profit if the company accepts the special order.;(b.) How would your analysis change if;Digital Devices, Inc., was producing and selling 100,000 units annually?;70. SOFT Micro Co., sells part #1973 for;$240 per unit and the standard cost of producing each unit of part #1973 is;determined as follows;SOFT received a special order for 1,000;units of part #1973. The only additional cost to SOFT is a special packaging;requirement that would cost $10 per unit.;(a.) If SOFT were currently able to sell;all of its production of part #1973, what would be the minimum sales price that;SOFT should consider for this special order?;(b.) Assume that SOFT has enough idle;capacity to produce 1,000 units of part #1973. If SOFT wants to increase its;operating profit by $110,000, what price per unit would SOFT charge for the;special order?

Paper#44946 | Written in 18-Jul-2015

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