Exhibit 30 (This relates to question below) Assume that Baps Corp. is considering the establishment of a subsidiary in Norway. The initial investment required by the parent is $5 million. If the project is undertaken, Baps would terminate the project after four years. Baps's cost of capital is 13 percent, and the project has the same risk as Baps's existing projects. All cash flows generated from the project will be remitted to the parent at the end of each year. Listed below are the estimated cash flows the Norwegian subsidiary will generate over the project's lifetime in Norwegian kroner (NOK): Year 1 NOK10,000,000 Year 1 Year 2 $.13 NOK15,000,000 Year 2 Year 3 The current exchange rate of the Norwegian kroner is $.135. Baps's exchange rate forecasts for the Norwegian kroner over the project's lifetime are listed below: $.14 NOK17,000,000 Year 3 Year 4 $.12 NOK20,000,000 Year 4 $.15 Refer to Exhibit 30. What is the net present value of the Norwegian project?

Exhibit 30 (This relates to question below) Assume that Baps Corp. is considering the establishment of a subsidiary in Norway. The initial investment required by the parent is $5 million. If the project is undertaken, Baps would terminate the project after four years. Baps's cost of capital is 13 percent, and the project has the same risk as Baps's existing projects. All cash flows generated from the project will be remitted to the parent at the end of each year. Listed below are the estimated cash flows the Norwegian subsidiary will generate over the project's lifetime in Norwegian kroner (NOK): Year 1 NOK10,000,000 Year 1 Year 2 $.13 NOK15,000,000 Year 2 Year 3 The current exchange rate of the Norwegian kroner is $.135. Baps's exchange rate forecasts for the Norwegian kroner over the project's lifetime are listed below: $.14 NOK17,000,000 Year 3 Year 4 $.12 NOK20,000,000 Year 4 $.15 Refer to Exhibit 30. What is the net present value of the Norwegian project?

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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An MNC is considering establishing a two- year project in New Zealand with a USD$50 million initial investment. The required rate of return on this project is 11%. The project is expected to generate cash flows of NZ$15 million in Year 1 and NZ$35 million in Year 2, excluding the salvage value. Assume a stable exchange rate of USD$.70 per NZ$1 over the next two years. All cash flows are remitted to the parent. What is the break-even salvage value? about NZ$47 million about NZ$21 million about NZ$14 million about NZ$60 million about NZ$36 million
Anderson International Limited is evaluating a project in Erewhon. The project will create the following cash flows: Year Cash Flow -$590,000 O 1 234 220,000 163,000 228,000 207,000 All cash flows will occur in Erewhon and are expressed in dollars. In an attempt to improve its economy, the Erewhonian government has declared that all cash flows created by a foreign company are "blocked" and must be reinvested with the government for one year. The reinvestment rate for these funds is 7 percent. Assume Anderson uses a required return of 13 percent on this project. a. What is the NPV of the project? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the IRR of the project? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. b. X Answer is complete but not entirely correct. NPV IRR -17,315.59 x 14.39 X %
Please answer the question as in attached file.
Anderson International Limited is evaluating a project in Erewhon. The project will create the following cash flows: Year Cash Flow -$590,000 0 1 2 √34 3 220,000 163,000 228,000 207,000 All cash flows will occur in Erewhon and are expressed in dollars. In an attempt to improve its economy, the Erewhonian government has declared that all cash flows created by a foreign company are "blocked" and must be reinvested with the government for one year. The reinvestment rate for these funds is 7 percent. Assume Anderson uses a required return of 13 percent on this project. a. What is the NPV of the project? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the IRR of the project? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. b. X Answer is complete but not entirely correct. NPV IRR $ 17,315.59 x 14.40 × %
Acme is looking to acquire Pinder Co now. Acme is expected to generate annual cash flows of $15,000,000 in perpetuity and Pinder is expected to generate annual cash flows of $6,000,000 in perpetuity. The discount rate for both Acme and Pinder is 8%. If Acme acquires Pinder, Acme expects to be able to reduce operating costs by $4,500,000 for the first five years. However, Acme will also incur integration costs of $3,000,000 in the first year. All cash flows occur at the end of the year. To encourage investment into electric bicycles, the government is offering Acme an option to abandon its operations and sell all related assets for $1 million at the end of year 4. If Acme chooses the option to sell all related assets to the government, it will not receive the cash flows generated from the electric bicycle business in that year. What is the value of this option? Answer based only on the information provided.
Leland Industries is a producer of bakery and snack goods in Western Canada and are considering expending into Eastern Canada. The expansion is estimated to cost $10,000,000 for a new production facility. This project is in the same line of business as the firm's current operations and is therefore not expected to alter the risk of the firm. The most recent balance sheet is provided below. Leland Industries Balance Sheet As at Dec 31, 2021 Assets Liabilities Accounts Payable Other Current Liabilities $ Cash & Marketable Securities 425,000 300,000 Accounts Receivable $ 400,000 425,000 Inventories 500,000 Total Current Liabilities 725,000 Total Current Assets $ 1,325,000 Net Fixed Assets 18,000,000 LT Debt * 6,500,000 Preferred Stock ** 2,500,000 Common Stock*** 3,000,000 Retained Earnings 6,600,000 Total Liabilities & Total Assets $ 19,325,000 Owners Equity $ 19,325,000 Notes to financial statements: * The 5% semi-annual coupon bonds have a face value of $1,000, were issued 5 years ago…
4. Mulroney Corp. is considering two mutually exclusive projects. Both require an initial investment of S9,000 at t = 0. Project X has an expected life of 2 years with after-tax cash inflows of $6,200 and $7,100 at the end of Years 1 and 2, respectively. In addition, Project X can be repeated at the end of Year 2 with no changes in its cash flows. Project Y has an expected life of 4 years with after-tax cash inflows of $4,600 at the end of each of the next 4 years. Each project has a WACC of 8%. Using the replacement chain approach, what is the NPV of the most profitable project? Do not round the intermediate calculations and round the final answer to the nearest whole number. a. 5,113 b. 4,989 c. 5,425 d. 5,924
Carlyle Inc. is considering two mutually exclusive projects. Both require an initial investment of $14,200 at t = o. Project S has an expected life of 2 years with inflows of $7,400 and $12,800 at the end of Years 1 and 2, respectively. In addition, Project S can be repeated at the end of Year 2 with no changes in its cash: L has an expected life of 4 years with after-tax cash inflows $6,900 at the end of each of the next 4 years. Each project has a WACC of 10%. What is the equival annuity of the most profitable project? Do not round your intermediate calculations. O a $2,420.31 O b. $1,789.52 c. $2,533.33 Od. $2,827.56 Oe $3,110.31
Select- (increases/reduces) please show with steps thanks!
a) watax inc a mining outfit in phoenix intends to engage in mining operations in southern Africa after conducting comprehensive feasibility of the referenced country. Assume that the prevailing interest rate in South Africa is 9 percent. To meet its working capital needs, watax will borrow south African rands, convert them to us dollars, and repay the loan in one year. What will watax effective financing rate if the rand depreciates by 6 perfect or appreciates by 3 percent. Discuss your result. b) given the information and assuming a 50 % probability that either scenario would occur, determinate the expected value of the effective financing rate. c) Assume that the one tear prevailing interest in mexico is 5 percent while that in the US is 8%. What percentage change in the peso would cause a US firm borrowing peso to incur the same effective financing rate as it would it borrowed dollars. Discuss the result
Investapp Ltd is considering whether to undertake one of two mutually exclusive projects, each of which would require the purchase of an asset costing £50,000, which would have a zero scrap value at the end of four years. Cost of capital is estimated at 10%. The cash flows associated with the two projects are as follows: Project X £ Project Y £ Initial investment 50,000 50,000 Net cash inflows: Year 1 40,000 30,000 20,000 20,000 30,000 20,000 30,000 30,000 Year 2 Year 3 Year 4 Discount factors @ 10% Rate 10% Year 1.000 1 0.909 2 0.826 3 0.751 4 0.683
Anderson International Limited is evaluating a project in Erewhon. The project will create the following cash flows: Year Cash Flow -$590,000 O 1 2 3 4 220,000 163,000 228,000 207,000 All cash flows will occur in Erewhon and are expressed in dollars. In an attempt to improve its economy, the Erewhonian government has declared that all cash flows created by a foreign company are "blocked" and must be reinvested with the government for one year. The reinvestment rate for these funds is 7 percent. Assume Anderson uses a required return of 13 percent on this project. a. What is the NPV of the project? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the IRR of the project? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

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