Golf Ball Inc. expects earnings to be $10,000 per year in perpetuity if it pays out all of its earnings in dividends. Suppose the firm has an opportunity to invest $1,000 of next year's earnings to upgrade its machinery. It is expected that this upgrade will increase earnings in all future years (starting two years from now) by $140. Assume that Golf Ball's next dividend is one year from now. The required rate of return is 12%.   What is the value of Golf Ball Inc. if it undertakes the upgrade?

Q: 2. ABC Corporation plans to set aside $50,000 per year beginning 1 year from now for replacing…

A: Annual amount (P) = $50,000 Interest rate (r) = 10% Inflation rate (i) = 4% Period (t) = 6 Years

Q: what is its enterprise​ value?

A: Information Provided: Perpetual growth rate = 5% WACC = 8% Tax rate = 30% Increase in working…

Q: Mike Derr Company expects to earn 12% per year on an Investment that will pay $616,000 six years…

A: Answer :Present value=?=?[1/(1+ rate) ^time]Future value = $616,000Rate = 8%Time = 7  yearsPresent…

Q: which one is correct please suggest? QUESTION 39 Getrag expects its sales to increase 20% next year…

A: Firm needs funds to start the new projects or expand the existing one. Requirement of the funds…

Q: Assume that you are at Year O and are looking at two possible investments, both of which have a…

A: Annuity An annuity is a contract that you have with an insurance provider that calls for regular…

Q: Revenue from a project is expected to be $7000 per year in real terms (i.e. an identical project…

A: Real Value (P) = $7,000Inflation rate (r) = 2.4% or 0.024Number of years (n) = 8

Q: Consider Pacific Energy Company and Atlantic Energy, Incorporated, both of which reported earnings…

A: a. Current earnings = $970,000Required return = 13%Both the companies pay all earnings as…

Q: How much is the sum of the present value of the expected return over those periods

A: Cash Flows (Year 1-10) (CF) =  $15,000 per year Annual interest rate (r) = 5% Time Period (t) = 10…

Q: minimum value of X (number of years) for which Kunkle will consider the investment a success? Assume…

A: Given as, 4,000,000 < 800,000×PVAF(7%, x years)

Q: Victoria Enterprises expects earnings before interest and taxes (EBIT) next year of $2.1 million.…

A: Enterprise ValueEnterprise value is a comprehensive measure of a company’s total value, taking into…

Q: A. Assume that you have $7500 to invest. You plan to invest it for 10 years at a rate of 7% per…

A: Future Value = Present Value * (1 + Interest Rate)^Time

Q: Assume that an industrial building can be purchased for $1,500,000 today, is expected to yield cash…

A: Solution:-Internal Rate of Return (IRR) is the rate of return the project is yielding. It can be…

Q: An investment is expected to generate cash flows of $20,000 next year (at time t=1), and $10,000 in…

A: Given: Year Particulars Amount 1 Cash inflows $20,000 2 Cash inflows $10,000   Growth rate…

Q: You see an opportunity to invest $1 million in a business. The investment is expected to generate a…

A: The objective of this question is to determine whether it would be a sound decision to invest $1…

Q: Suppose you have an investment offer that guarantees an average investment gain of $1,000 per year.…

A: The average rate of change describes the rate at which one quantity changes in relation to another.…

Q: If Quail Company invests $50,000 today, it can expect to receive $10,000 at the end of each year for…

A: Net Present Value = Present value of cash inflows + Present value of salvage value - Initial…

Q: An investment of $185,575 is expected to generate returns of $65,000 per year for each of the next…

A: Internal rate of Return:  IRR is a discounting cash flow technique gives rate of return earned by…

Q: Suppose you receive​$130 at the end of each year for the next three years.    a. If the interest…

A: The PV of an asset is the value of all its cash flows today discounted at an assumed interest rate.…

Q: 1. $30,000 is invested at a compounded yearly interest rate of 6%, with the interest compounded…

A: Since you have asked a question with multiple sub parts, we will solve the first 3 parts for you as…

Q: Consider Pacific Energy Company and Atlantic Energy, Incorporated, both of which reported earnings…

A: a. Current earnings = $790,000 Required return = 11% All earnings are paid as dividends.The current…

Q: You have just received a windfall from an investment you made in a friend’s business. You will…

A: a) Present value = Future value / (1 + Rate)^Time Present value = $14,050/1.06 + $3,250/1.06^2 +…

Q: Your consulting firm will produce cash flows of $190,000 this year, and you expect cash flows…

A: a. The present value of growing annuityCF1 = 190,000 * 1.012 = 192,280PV = $846,974.47  b. With no…

Q: The expected Cash Flow From Assets of The Skate Shop for the next two years are $208,000 and…

A: Terminal value is the value which is assumed to be received due to a stable growth rate Formula for…

Q: Value a company that has current FCFo of $250,000 using a growth rate of 10% for the following 10…

A: Terminal Value is calculated by perpetual growth model. Terminal Value = Expected free cash flows/(r…

Q: Suppose you own a business and you expect to generate a profit of $50,000 next year. Each year after…

A: The present value of the company's valuation is the present value of all cash flows that are…

Q: If Quail Company invests $46,000 today, it can expect to receive $12,000 at the end of each year for…

A: Net present value method is used to evaluate the investment projects. We can evaluate the project by…

Q: what is the present value of all your profits over the next 5 years? SHOW A “ROUGH” CASH FLOW…

A: Time value of money (TVM) refers to the method used to measure the amount of money at different…

Q: 1) What is the present value of each offer?  2) Which offer should you take?

A: Time value of money (TVM) refers to the method or technique which is used to measure the amount of…

Q: You are evaluating a prospective LBO investment and determine that the Year 5 free cash flow (FCF)…

A: The perpetuity growth method (or the Gordon Growth Model) is a commonly used method to estimate the…

Q: A set of cash flows begins at $80,000 the first year, with an increase each year until n = 10 years.…

A: Present Value(PV) is current value of any amount that is to be paid or received in future. It is…

Q: calculate the PV today of the Terminal Value that is based on this perpetuity.

A: Present value: It is the present worth today of the cashflows and terminal value discounted at a…

Q: Michelle owns a laser tag center that is worth $570,000.00 and is expected to make annual cash flows…

A: Present value = $570,000Cost of capital = 9.34%Expected cash flow in year 1 = $46,000

Q: You invest in a company which expects to pay you the following amounts in return each year. Year 1:…

A: The formula for calculating the present value of a future cash flow is:​Where:FV = Future Value of…

Q: Answer the following lettered questions on the basis of the information in this table: Amount of…

A: Since more than one question is asked at a time the answer for first question is provided as per…

Q: 2.Your expected income will grow at 6% per year for the next five years. After that your income…

A: Present value of future earnings refers to the present worth of all future inflows discounted at a…

Q: A firm's current profits are $450,000. These profits are expected to grow indefinitely at a constant…

A: Current Profit = p = $450,000Growth rate = g = 3%Cost of Fund = r = 6%

Q: Assume that the interest rate is 8.5% per year and you expect to receive the following stream of…

A: Net present value is a capital budgeting techniques help in decision making on the basis of future…

Q: Suppose a company could invest in a machine that would be able to produce $1,000,000 worth of…

A: Cash flow for year 1 = cf1 = $1,000,000 Cash flow for year 2 = cf2 = $2,000,000 Cash flow for year 3…

Q: 5.A corporation is considering the purchase of an interest in real estate syndication at a price of…

A: Return on capital is the percentage return on the capital invested. It is the ratio of profit with…

Q: An investment is expected to generate annual cash flows forever. The first annual cash flow is…

A: A perpetuity refers to a stream of cash flows that goes on forever. The case here is that of a…

Q: Suppose an income stream will produce income at a rate of 4000 + 1000t dollars per year for 5 years,…

A: Present value Present value of an amount with continuous compounding. With continuous compounding…

Q: Your consulting firm will produce cash flows of $145,000 this year, and you expect cash flows…

A: Present value is the equivalent value of the cash flow today based on the time value of money and…

Q: A company predicts that the earnings will grow at 1% per year forever. Today, the company announced…

A: The concept of time value of money will be applied in this case to solve this question. The earnings…

Q: A firm's current profits are $700,000. These profits are expected to grow indefinitely at a constant…

A: Variables in the question:Current profit=$700000Annual growth rate =3%Opportunity cost of funds=5%