Now lets revisit the same POWSA venture but assume my projection of revenue and cost makes sense for eight years with no profitability after that (either because I will need to reduce my price in year nine to sustain sales volume or I will shut down after 8 years). What is the market value of POWSA equity in that case? Hint: use a spreadsheet to get the present value of anticipated dividends (or use the annuity formula if you are familiar with that) O $21.34 million so that Warren buffet would need something like a 95% stake to make the deal worth his while O $25 million so that Warren Buffet would need an 80% stake to make it worth his while O $17 million so the venture is not viable if $20 million of funding is required for the marketing O $32 million so that Warren Buffet would need more than a 50% stake to make it worth his while
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- We have the cash flow shown in the following graph. Under these conditions what would be the cash flow classification? Tenemos el flujo de caja que se muestra en la gráfica. ¿Bajo estas condiciones cual sería la clasificación del flujo de caja? 250 tyears O Negative Geometrik Gradient (Gradiente Geométrico Negativol O Positive Geometric Gradient (Gradiente Geométrico Positivo) O Positive Linear Gradient (Gradiente Lineal Positivn) O Negative Linear Gradient (Gradiente Lineal NegativolWhat is the definition of internal rate of return (IRR)? If you expect the annual interest rates are much different in the next 10 years, would the IRR be the ideal measure? Why or why not?Assume that the cost of a university education will be $250,000 when Mr. Parata's child enters university in 12 years' time. If the discount rate is 6.76% per annum, compounded monthly, what is the present value (in 2 decimal places)?" Do not enter "$" in your answer. For example, enter "1000.23" for "$1000.23".
- A free lunch?: “We will install new HVAC equipment for you, absolutely free!! Just signa three-year contract to split 50/50 any savings the equipment generates on the use of equipment plus pay for a service contract for the equipment’s maintenance. We will takeout the loan for the equipment and installation and pay off the loan with our share of the savings. After three years, the equipment is yours! You’ll only be giving us some of the money you are paying to the power company for electricity. The service contract for the equipment is $15,000 per year, but think of your peace of mind!” Evaluate if this is a free lunch or if there is a catch somewhere based on other financial data available. What data would you need? What evaluation criteria would you choose?XYZ corporation has budgeted P300,000 per year to pay for labor over the next five years. If thecompany expects the cost of labor to increase by P10,000 each year, what is the expected cost ofthe labor in the first year, if the interest rate is 10%You may purchase 100 shares of Mun Tee ltd on a 55 percent margin when the shares are selling at K20 each. The Lusaka stock exchange broke charges you 10 percent annual interest,and commission are 3 percent of total stock value on both the purchase and the sale. If a year later you receive a K0.50 per share dividend and sell the stock for K27. What's your rate of return on investment?
- . A firm has $75,000 of cost of goods sold and $5,000 of accounts payable. Assume there are 365 days a year, the firm's payables deferral period (PDP) is 24.33 days. The firm's new CFO believes that the firm could delay the payments of accounts payable to increase its PDP (without affecting cost of goods sold) to 30 days. If this could be done, by how much cash would be freed up due to increase in accounts payable? 3. Which of the following statements is NOT correct? Question 13 options: In practice, most firms operate under conditions of capital rationing because they have more acceptable independent projects than they can fund. The before-tax cost of debt is used as the component cost of debt for purposes of developing the firm's weighted average cost of capital. The capital structure that minimizes a firm's weighted average cost of capital also maximizes its stock price. New common stock is typically the most expensive form of equity, followed by retained…2. A contract between BF Goodrich and the Steelworkers Union of America called for the company to spend $100 million in capital investment to keep the facilities competitive. The contract also required the company to provide buyout packages for 400 workers. If the average buyout package is $100,000 and the company is able to reduce costs by $20 million per year, what rate of return will the company make over a 10-year period? Assume all of the company's expenditures occur at time 0 and the savings begin 1 year later.A man is considering investing P500, 000 to open a semi-automatic auto-washing business in a city of 400, 000 population. The equipment can wash, on the average, 12 cars per hour, using two men to operate it andto do small amount of hand work. The man plans to hire two men, inaddition to himself, and operate the station on an 8-hour basis, 6 days perweek, 50 weeks per year. He will pay his employees P25. 00 per hour. Heexpects to charge P25. 00 for a car wash. Out-of-pocket miscellaneouscost would be P8, 500 per month.He would pay his employees for 2 weeks for vacations each year.Because of the length of his lease, he must write off his investment within 5years. His capital now is earning 15%, and he is employed at a steady jobthat pays P25, 000 per month. He desires a rate of return of at least 20% onhis investment. Would you recommend the investment?a) Use ROR methodb) Use Annual Worth methodc) Use present worth methodd) Use future worth methode) Solve for the payback period and the…
- Suppose I have computed the cost of carbon per mile for my car at 0.011 per mile. Assume that the interest rate is 5% and that I drive the car 30,000 miles per year. What is present value of the carbon expense for five years? You will need to use the PV function in Excel or a financial calculator. In Excel the present value of a stream of monetary cash flows is given by -PV(rate, number of payments, payment amount) where rate is the interest rate. We enter the payment in Excel as a positive number. You can also compute the carbon cost per year and then discount those five values back to the present.Assume that your father is now 50 years old and plans to retire after 10 years from now. He is expected to live for another 25 years after retirement. He wants a fixed retirement income of Rs. 5,00,000 per annum. His retirement income will begin the day he retires, 10 years from today, and then he will get 24 additional payments annually. Your father has current savings of Rs. 10,00,000 and he expects to earn a return on his savings @ 10% p.a., annually compounding. How much (to the nearest of rupee) must your father save during each of next 10 years to meet his retirement goal?The internal rate of return (IRR) is the interest rate that sets the net present value (NPV) of the cash flows equal to zero Select one: O True O False