1. An investor is pondering on whether to invest in a siomai franchise or in a printing press company. He had his staff analyze the cost benefits that he would get from the two business ventures and they came up with this report. A. The siomai franchise would need Php 800 000 as capital. It has a 60-percent chance of profiting Php 400 000; a 15-percent chance of profiting Php 600 000; and 25- percent chance of losing the capital entirely. B. The paper manufacturing company would need Php 800 000 as capital. It has a 35- percent chance of earning Php 1000 000 and a 65-percent chance of losing the capital entirely. C. Which between the two business ventures should the investor invest his Php 800 000?

1. An investor is pondering on whether to invest in a siomai franchise or in a printing press company. He had his staff analyze the cost benefits that he would get from the two business ventures and they came up with this report. A. The siomai franchise would need Php 800 000 as capital. It has a 60-percent chance of profiting Php 400 000; a 15-percent chance of profiting Php 600 000; and 25- percent chance of losing the capital entirely. B. The paper manufacturing company would need Php 800 000 as capital. It has a 35- percent chance of earning Php 1000 000 and a 65-percent chance of losing the capital entirely. C. Which between the two business ventures should the investor invest his Php 800 000?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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1 AND 2
Sally is thinking about starting a new business. The company would require $700,000 of assets, financed with 40% debt and 60% equity. She will go forward only if she thinks the firm can provide an ROE of at least 15.9%. Operating at a profit margin of 12%, what is the minimum amount of sales that must be expected to support starting the business? Your answer should be between 472000 and 595000, rounded to even dollars (although decimal) places are okay), with no special characters.
As the owner of a small startup, you are faced with a fewmajor financial decisions concerning the expansion orpotential sale of your business. Based on the followingdetails, you must calculate the Present Value, Future Value,Loan Amortization and NPV/Firm Value.Present Value:You are required to have $250,000 seven years from nowfor new manufacturing equipment. Not sure how much youwill need to save as a lump-sum today, you calculate thepresent value (for the beginning of the period) with thefollowing additional details. Interest Rate of 6% with nofuture deposits.Future Value:To take advantage of the rising interest rate environmentthrough the actions of the Federal Reserve, you decide toinvest in U.S. Treasury Bills maturing in one year. Curious toknow what your investment will be worth one year fromtoday, you calculate the future value (for the end of theperiod) based on the following details. Number of period isone, interest rate is 5.25% (compounded monthly), no futuredeposits,…
Assume that you are thinking about starting your own small business. You have made the following estimates regarding this opportunity: • You can rent a location for your business at a cost of $36,000 per year. The equipment costs incurred to start the business would total $250,000. The equipment would have a 5-year useful life and a salvage value of $25,000 Your company's estimated sales per year would equal $350,000 and its variable cost of goods sold would be 30% of sales. • Other operating costs would include $58,000 per year in salaries, $4,000 per year for insurance, $25,000 per year for utilities, and a 3% sales commission The simple rate of return for this investment opportunity is closest to: Multiple Choice 22.0% 19.0% 26.6% 15.7%
As the new engineer in the company, you are tasked to send out a proposal for an expansion of the current manufacturing plant. As per research, you came up with a summary of the capital needed and it is amounting to Php 18,500,000.00. Annual depreciation is noted as well as 10% of your capital invested. You are asked to determine the rate of return if your projected annual revenue is at Php 5.500,000.00. Express the answer in percentage, up to two decimal places/digits. Answer Blank 1%
As the new engineer in the company, you are tasked to send out a proposal for an expansion of the current manufacturing plant. As per research, you came up with a summary of the capital needed and it is amounting to Php 18,500,000.00. Annual depreciation is noted as well as 10% of your capital invested. You are asked to determine the rate of return if your projected annual profit is at Php 5,500,000.00. Express the answer in percentage, up to two decimal places/digits.
(a) If Roxy Inc. were to be 100% equity financed, what would be a reasonable estimate of the expected return on Roxy's equity? What is Roxy's WACC? expected return on equity is: Roxy's WACC is: [SHOW YOUR WORKING]
As the financial manager of Wilmore Company Limited, with a passion to boost employment creation through intraregional tourism in Ghana, you have acquired a land at Ho to put up an exquisite amusement park that features a number of attractions including games, pools, gardens, rides etc. The project will cost a total of GH₵100,000. The following cash flows are expected from the project. The beta of the project is 1.5 and the market return is 15%. The risk-free rate of return is 8%.Year₵ 0(100,000) 120,000 225,000 332,000 435,000 Using the CAPM approach, what is the cost of equity on this project?Wilmore Company Limited is a levered entity with percentage of debt out of total capital being 40%. If the interest rate on a bank loan is 10%, the tax rate is 20%, and the cost of equity is as computed in (a), what will be the after tax cost of debt? What will be the weighted average cost of capital (WACC)? Using the WACC computed in (c), what will be the NPV of the investment? `…
This question relates to the SportHolel problem we covered in class (and is also in your textbook and course workbook). In the original problem, your firm would build a hotel that would either be worth 58m if the franchise is or the franchise was Additionally, the hotel would incur in year 1 by in year 2 and $2m in year Let's consider the foliowing changes to the original problem. If the franchise is awarded the hotel wil be worth 9.60 instead of $8m and if denied the franchise, the hotel will only be worth 3.20. Additionally, the costs in incurred in the first year will be 1.30 but the costs in year 2 and 3 will remain the same. All other aspects of the problem are the same as originally presented, such as the costs per year. Assume that the probability of obtaining the franchise is 40%. Incorporating these new hotel values from above, and the real option what is the new NPV of the project? $5.76 $0.44 Ⓒ5-0.04 14.76 Ⓒ10.92 SUBMIT ANSWER

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