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Question;Question.1- For this question I;only need the answer to b.;a. Find the present values of the following cash flow streams. The appropriate;interest rate is 8%;Year Cash;Stream A Cash;Stream B;1 \$100;nbsp;\$300;2;400 400;3;400;400;4;400 400;5;300 100;b. What is the value of each cash;flow stream at a 0 % interest rate?;Question 2.;If a typical firm reports \$20 million of retained earnings on its balance;sheet, could its directors declare a \$20 million cash dividend without any;qualms whatsoever?.;Question 3.;The Menendez Corporation expects to have sales of \$12 million. Costs other than;depreciation are expected to be 75% of sales, and depreciation is expected to;be \$1.5 million. All sales revenue will be collected in cash, and cost other;than depreciation must be paid for during the year. Menendez federal-plus-state;tax rate is 40%.;a. Set up an income statement. What is Menendez?s;expected net cash flow?;b. Suppose Congress changed the tax laws so that;Menendez?s depreciation expenses doubled. No changes in operations occurred.;What would happen to reported profit and t net cash flow?;c. Now suppose that Congress, instead of doubling;Menendez?s depreciate, reduced it by 50%. How would profit and net cash flow be;affected?;d. If this were your company would you prefer;Congress to cause your depreciation expense to be doubled or halved? Why?;Question 4;Project K has a cost of \$52,125, its expected net cash inflows are \$12,000 per;year for 8 years, and its cost of capital is 12%.;a. What is the project?s payback period (to the;closest year)?;b. What is the project?s discounted payback;period?;Project K's discounted;payback period is calculated as follows;c. What;is the project?s NPV?;d. What is the project?s IRR;Question 5;Edelman Engineering is considering including two pieces of equipment, truck and;an overhead pulley system, in this year?s capital budget. The projects are;independent. The cash outlay for the truck is \$17,100, and that for the pulley;system is \$22,430. The firm?s cost of capital is 14%. After-tax cash flow;including depreciation, are as follows;Year Truck;Pulley;1 \$5,100 \$7,500;2;5,100;7,500;3;5,100;7,500;4;5,100;7,500;5;5,100 7,500;Calculate the IRR and the NPV, and indicate the correct accept/reject decision;for each.;Question 6;Your division is considering tow investment projects, each of which requires;and upfront expenditure of \$25 million. You estimate that the cost of capital;is 10%, and that the investments will produce the following after-tax cash;flows (in millions of dollars).;Year Project;A Project;B;1;5;20;2;10;10;3;nbsp;15;nbsp;8;4 &&nbs;p;20;6;a. What is the regular payback period for each of;the projects?;b. What is the discounted payback period for each;of the projects?;c. If the two projects are independent and the;cost of the capital is 10%, which project or projects should the firm;undertake?;d.;If the;two projects are mutually exclusive and the cost of capital is 5%, which;project should the firm undertake?;e. If the two projects are mutually exclusive and;the cost of capital is 15%, which project should the firm undertake?

Paper#47913 | Written in 18-Jul-2015

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