ratu nd nor & fi @cash = (FC QUESTION THREE Kumba Iron Ore (Kumba) is a major supplier of iron ore to the steel industry and the company is the 4th largest supplier of seaborne iron ore in the world. The company exports over 34 million tonnes per year. The company's reserves amount to over a billion tonnes. Kolomela (Sisheni South) represented a major expansion mining project for Kumba. Kumba is considering a new project with an expected life of three years and is expected to result in an increase in sales revenue of K20 billion in the first year, K30 billion in the second year and K10 billion in the third year. Operating costs will amount to 70% of sales revenue and the company is required to make an investment in working capital of K6 billion at the beginning of the project, which is recoverable at the end of the life of the project. The cost of the project is K18 billion and the residual value at the end of three years is K11 billion. The required rate of return is 14%. Assuming no taxation. (a) What is the project's NPV? (b) What is the project's IRR? (8 marks) (9 marks) Should the company invest in this project (3 marks) [back your justification by using your calculations in (a) and (b) above]. Total [20 marks] END OF EXAMINATION PAPER
Q: You have just taken out a $15,000 car loan with a 7% APR, compounded monthly. The loan is for 5…
A: The objective of the question is to determine how much of the first payment will go towards the…
Q: Michael has a credit card debt of $70,000 that has a14% APR, compounded monthly. The minimum…
A: Part 2: Explanation:Step 1: Calculate the monthly payment \( P \) for the old credit card with a 14%…
Q: Valuing a share of a stock (P) that pays a constant dividend forever: Assume you expect the dividend…
A: The objective of this question is to find the price of a share of a stock that pays a constant…
Q: Assume Highline Company has just paid an annual dividend of $1.05. Analysts are predicting an 10.5%…
A: Step 1:We have to calculate the value of the stock of the company. For this, we have to first…
Q: Alpha Limited has sales of £100,000, variable costs of £60,000 and fixed costs of £20,000. What is…
A: Step 1: Meaning of Operating GearingOperating gearing is the relationship between fixed costs,…
Q: Dog Up! Franks is looking at a new sausage system with an installed cost of $705,000. This cost will…
A: Step 1: Introduction to capital budgetingCapital budgeting refers to the process of analyzing…
Q: Abandonment Value Problem Required Return is IN 000's 10% NORMAL YEAR 0 CASH FLOW (8,800) ABANDONENT…
A: Net present value (NPV) is the difference between the present value of cash inflows and the present…
Q: When close to the zone of insolvency, managers have an incentive to gamble. This is known as…
A: The term that best describes this situation from your options is:a) an agency cost of debt that…
Q: Required: Refer to Figure 15.1, which lists the prices of various Microsoft options. Use the data in…
A: Let's examine the payoffs and profits associated with call and put options expiring in November…
Q: Financial Modeling Practices Financial modeling professionals typically break their work down into…
A: Certainly! Corkscrew schedules are detailed worksheets commonly used in financial modeling to…
Q: Cameron and Diamond are saving for their daughter Candice's college education. Candice just turned…
A: The objective of the question is to find out the amount of annual payments that Cameron and Diamond…
Q: What is the price of a European CALL option that is expected to pay a dividend of $2 in three months…
A: Step: 1Present value of dividend = $2 x e^(-r x (3/12)) = $1.951Adjusted Stock price (S) = $40 -…
Q: You issued debt in the form of bonds, with a face value of $1,000, and have 9 years until maturity.…
A:
Q: This section asks you to calculate prices for various options. In all cases, consider a rate r =…
A: The objective of the question is to find the payment function of a European Put option. A European…
Q: Find the interest refund on a thirty six month loan with interest of two thousand eight hundred and…
A: The objective of the question is to calculate the interest refund on a loan that is paid off early.…
Q: The price of a home is $260,000. The bank requires a 20% down payment and one point at the time of…
A: Explanation:Step 1: Calculate the down payment.The home price is $260,000, and the bank requires a…
Q: Please step by step solutions and final solution is short answer mi
A: Certainly! The Additional Funds Needed (AFN) approach is a financial management technique used to…
Q: Incorrect Question 10 Which of these statements about Primary Markets are true? (i) Rights Offerings…
A: The objective of the question is to identify the correct statements about Primary Markets among the…
Q: A 6.34% coupon bond with 11 years left to maturity is priced at $1,010.55. What is this bond's yield…
A: Step 1:Given:Current price (P): $1,010.55Coupon payment (C): 6.34% of $1,000, paid semiannuallyPar…
Q: You have been given the following information: State of Economy Recession Normal Boom Probability of…
A:
Q: the accounting break even units are 13,321. the fixed costs are $164,800 and the projected variable…
A: In accounting, the breakeven point is calculated by dividing the fixed costs of production by the…
Q: A closed‑end investment company Question 11 options: a) has a fixed…
A: The question is asking to identify the characteristic of a closed-end investment company from the…
Q: Hasbro Plc, an airline navigation supplier, is in the process of buying a start-of-the art…
A: Net Present Value (NPV) Analysis for Hasbro PlcDiscount Rates:Money cost of capital (MCC): 6%Real…
Q: A Town Council has decided to build a new community center to be used for conventions, concerts, and…
A: The objective of the question is to determine the best decision for the town council to make…
Q: Find the net price for an order of tires with a list price of $19,000 less trade discount of…
A: The net price complement method involves calculating the complement of each discount (which is 1…
Q: A bond that pays interest semiannually has a price of $981.73 and a semiannual coupon payment of…
A: The current yield of a bond is a measurement of the return that an investor might anticipate…
Q: Zambezi Corp. expects EBIT to vary with the state of the economy as follows: State of economy…
A: 1. Expected Earnings Per Share (EPS) during a boom: - During a boom, Zambezi Corp. expects to…
Q: Stock Y has an expected excess return of 10% and its beta is 1.25. The Market portfolio expected…
A: Alpha measures the excess return of an investment compared to what would be expected given its risk,…
Q: A firm has sales of $1,040, net income of $208, net fixed assets of $508, and current assets of…
A: Total Assets = Fixed Assets + Current AssetsTotal Assets = 508+264Total Assets = $772 Common-size…
Q: In the past several years, Shakira had loaned money to Shakira Incorporated (an S corporation) to…
A: The objective of the question is to determine Shakira's income from the partial loan repayment made…
Q: Q4. Assume bond in Muscat stock market pays 10 percent annual coupon rate and has face value of 100…
A: Step 1:We have to calculate the expected change in the price of the bond. We know that bond price…
Q: Assume you manage a bond portfolio. The dollar duration of the portfolio is -60000. An instrument is…
A: In order to efficiently manage a bond portfolio, it is essential to maintain duration neutrality in…
Q: If interest rates are ______, ______ projects will have positive NPVs. Question 8 options:…
A: The objective of the question is to understand the relationship between interest rates and the Net…
Q: B1 ẞ2 ẞ3 Stock A 2.15 1.15 .90 Stock B .92 1.75 -.35 Stock C .91 -.48 1.57 The risk premiums for the…
A: Certainly! Let's break down the calculations and explanations step by step:1. **Beta of the…
Q: ↓ Assume a member is selected at random from the population represented by the graph. Find the…
A:
Q: Power Manufacturing has equipment that it purchased 7 years ago for $2,350,000. The equipment was…
A: Step 1: Calculations: Useful life − 9years Cost−$2,350,000…
Q: Consider the following project of Hand Clapper, Incorporated. The company is considering a four-year…
A: Explanation:Step 1: Calculate Annual Cash Flows- Annual Revenue = $11.4 million- Total Operating…
Q: Question 9-43 A project has the following costs and benefits. What is the payback period? Year Costs…
A: The objective of this question is to calculate the payback period of a project. The payback period…
Q: 11 of 20 Delilah Bundy is the policyowner-insured of a $300,000 whole life insurance policy that…
A: Step 1: Here's why: (i). Misstatement of Age Provision: Most whole life insurance policies have a…
Q: Which of the following is best suited for gathering causal information? Question 1 options:…
A: The objective of the question is to identify the type of research that is best suited for gathering…
Q: A company used to have zero debt and just issued 195,000 of perpetual 9% debt and used the proceeds…
A:
Q: Extreme Manufacturing Company provides the following ABC costing information: Activities Account…
A: Step 1: Calculate the allocation rates for each activity.For Account Inquiry:Allocation rate = Total…
Q: I need the list of all the rights issues or rights offers which have happened in the last 10 years…
A: Explanations: As a type of secondary market offering, rights issues allow a business to generate…
Q: K Make an amortization table to show the first two payments for the mortgage. Amount of mortgage…
A: The computation is shown in excel table below: The formula used above is shown below: Working…
Q: The president of the American Insurance Institute wants to compare the yearly costs of auto…
A:
Q: risk averse CEO takes over a company that has 20% debt and 80% equity in its capital structure. Its…
A: Given information: Levered equity Beta (bL) = 1.4 Debt (D) = 20% or 0.20 Equity (E) = 80% or 0.80…
Q: Your company expects to pay GBP 1,500,000 in 180 days. The 180 day forward rate for GBP is $1.80 and…
A: Approach to solving the question:Please see attached photos for detailed solutions. Thank you.…
Q: Under what conditions might dividend policy affect the value of the firm? Question options:…
A: The correct option that describes a condition under which dividend policy might affect the value of…
Q: Card №1 ABC Company is located in Greece. That company wants to raise its capital that is why…
A: Certainly! Let's break down each calculation:1. **Cost of New Debt (Rd):** - We need to calculate…
Q: The ABC approach to inventory management is based on the concept that: Multiple Choice…
A: The management of inventory is a vital component of every business, since it has a direct influence…
Step by step
Solved in 2 steps
- Saudi Aramco is the world’s largest integrated oil and gas company; its upstream operations manage the Kingdom’s unique hydrocarbon reserve base, optimizing production and maximizing long-term value. It also operates a strategically integrated global downstream business. Headquartered in the city of Dhahran, the company operates within the Kingdom and worldwide, and employs more than 68,000 people (Annual Report) Research and identify the most recent capital investment decisions for the business and the effect of those decisions in the business long term economic sustainability.Banana group is one of the largest MNC in the world, with more than 20 years of extensive experience in the exporting of bananas to Central Asia countries with the purpose of selling there. It wants to open a new subsidiary in Almaty which will sell exported bananas to the citizens of Almaty. They are evaluating a project (subsidiary) with the following characteristics: -Fixed capital investment includes the purchase of five refrigerators which cost 92,000 tenge each; two packaging machines 105,165 tenge per unit; two units of some equipment which is 25,000 tenge/unit; one truck 40,000 tenge; a factory of 1,000 meters square and 30,000 tenge per meter square, the factory seller will provide a ten percent discount from the total cost of factory; and some other fixed capital costs amount in 20,000 tenge. -The project has an expected five-year life. -The initial investment in net working capital is 1,500,000 tenge -The fixed capital is depreciated using straight line method -Sales are…Y7 J&R Construction Company is an international conglomerate with a real estate division that owns the right to erect an office building on a parcel of land in downtown Sacramento over the next year. This building would cost $32 million to construct. Due to low demand for office space in the downtown area, such a building is worth approximately $31 million today. If demand increases, the building would be worth $33.2 million a year from today. If demand decreases, the same office building would be worth only $29.5 million in a year. The company can borrow and lend at the risk-free annual effective rate of 6.5 percent. A local competitor in the real estate business has recently offered $768,000 for the right to build an office building on the land. What is the value of the office building today? Use the two-state model to value the real option. (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g.,…
- QUESTION 1You are the mine manager of Mine X and you want to expand your operations. The feasibility study shows that you have two options to consider.Option A is to sell your product to a local consumer.Option B is to export your product. The feasibility study yielded the following results for Options A and B.Option A Total reserve base 80 million tonsCapital required R1 000 millionMining rate 8 million tons per yearYield 100%Production cost R35,00 ROM per tonSales price R80,00 per tonTax rate 30%NPV 47,09 millionIRR 22%Option B Total reserve base 80 million tonsCapital required R2 000 millionMining rate 8 million tons per yearYield 70%Production cost R35,00 per ROM tonBeneficiation cost R45,00 per ROM tonTransport…Ruba Nasser SAOG is planning to invest in project as part of the organization's growth strategy to enhance the financial sustainability of the organization. The organization has two options available. Option 1– Project A – Increase the capacity in Division A Option 2 – Project B – Increase the capacity in Division B. Both projects are mutually exclusive. The available capital investment for the Project is RO 250,000. Due to the limited funds the organization needs to decide on a suitable investment project which will be part of the sustainable growth strategy. Below are the details for both Projects Project A - Increase in machine capacity in Division A Cost of Investment – RO 250,000 Useful Life – 4 Years Year Operating Profit Before Depreciation (RO) 55,000 65,000 80,000 80,000 1 2 3 4 The project has a scrap value of OMR 75,000. Project B – Increase in Machine Capacity in Division B Cost of Investment – RO 250,000 Operating Profit Before Depreciation (RO) 75,000 75,000 78,000 82.000…CASE STUDY Giangelo Corporation would like to venture in manufacturing a specialized tool that is required by a semi-conductor company. In order to accomplish this, it is considering two options that both require raising large amount of funds. First option (Project X) is the construction of a factory building and acquisition of machineries for an estimated cost of P30 million. The other alternative (Project Y) is the acquisition of an existing company that manufactures the same tool at a price of P50 million. In order to fund the project, the Company will have to apply for a loan from a bank and issue shares of stocks. The management contemplated a more leveraged approach by availing the 70% of the financial requirements through loan borrowing and the rest from the issuance of shares. The interest on bank loan is at 11% per annum while the issuance of shares will require return to stockholders at 8% per annum. The applicable income tax rate is 25%. Both of the projects will have…
- 1. CASE STUDY Giangelo Corporation would like to venture in manufacturing a specialized tool that is required by a semi- conductor company. In order to accomplish this, it is considering two options that both require raising large amount of funds. First option (Project X) is the construction of a factory building and acquisition of machineries for an estimated cost of P30 million. The other alternative (Project Y) is the acquisition of an existing company that manufactures the same tool at a price of P50 million. In order to fund the project, the Company will have to apply for a loan from a bank and issue shares of stocks. The management contemplated a more leveraged approach by availing the 70% of the financial requirements through loan borrowing and the rest from the issuance of shares. The interest on bank loan is at 11% per annum while the issuance of shares will require return to stockholders at 8% per annum. The applicable income tax rate is 25%. Both of the projects will have…Kashmiri's Cost of Capital. Kashmiri is the largest and most successful specialty goods company based in Bangalore, India. It has not yet entered the North American marketplace, but is considering establishing both manufacturing and distribution facilities in the United States through a wholly owned subsidiary. It has approached two different investment banking advisors, Goldman Sachs and Bank of New York, for estimates of what its costs of capital would be several years into the future when it planned to list its American subsidiary on a U.S. stock exchange. Using the assumptions by the two different advisors in the popup window, E, calculate the prospective costs of debt, equity, and the WACC for Kashmiri (U.S.). What is the after-tax cost of debt estimated by Goldman Sachs for Kashmiri? 6.24% (Round to two decimal places.) Data table (Click on the following icon in order to copy its contents into a spreadsheet.) Assumptions Symbol Goldman Sachs Bank of New York 0.86 0.36 Estimate of…One of the important components of multinational capital budgeting is to analyze the cash flows generated from subsidiary companies. Consider this case: Sacramone Products Co. is a U.S. firm evaluating a project in Australia. You have the following information about the project: • The project requires an investment of AU$1,230,000 today and is expected to generate cash flows of AU$1,200,000 at the end of each of the next two years. • The current exchange rate of the U.S. dollar against the Australian dollar is $0.7877 per Australian dollar (AU$). • The one-year forward exchange rate is $0.8109 / AU$, and the two-year forward exchange rate is $0.8455 / AU$. • The firm’s weighted average cost of capital (WACC) is 9%, and the project is of average risk. What is the dollar-denominated net present value (NPV) of this project? $933,397 $777,831 $738,939 $855,614
- One of the important components of multinational capital budgeting is to analyze the cash flows generated from subsidiary companies. Consider this case: Jing Associates Inc. is a U.S. firm evaluating a project in Australia. You have the following information about the project: • The project requires an investment of AU$800,000 today and is expected to generate cash flows of AU$900,000 at the end of each of the next two years. • The current exchange rate of the U.S. dollar against the Australian dollar is $0.7877 per Australian dollar (AU$). • The one-year forward exchange rate is $0.8109 / AU$, and the two-year forward exchange rate is $0.8455 / AU$. • The firm's weighted average cost of capital (WACC) is 8.5%, and the project is of average risk. What is the dollar-denominated net present value (NPV) of this project? O $792,199 $861,086 $688,869 O $826,643 There are three major types of international credit markets. Read the following statement and then indicate which type of…Good shoes Limited is a company that deals with production of leather shoes. The manufacturing division manager has proposed the purchase of machine A or B to enhance the production capacity. The machines are mutually exclusive. Machine A costs 30 million while Machine B costs 55 million. The expected cash flows from each of the machines for 3 years are provided below. Year 1 2 3 Machine A 15 million 18 million 20 million Machine B 13 million 17 million 19 million Required:Using NPV technique, advice the manufacturing manager on the best machine to purchase assuming that the cost of capital is 10%Carpet Baggers, Incorporated, is proposing to construct a new bagging plant in a country in Europe. The two prime candidates are Germany and Switzerland. The forecasted cash flows from the proposed plants are as follows: Candidates Germany (millions of euros) Switzerland (millions of Swiss francs) -63 -106 C1 +13 +23 a. Net present value b. Net present value c. Should the company go ahead with either project? d. If it must choose between them, which should it take? C₂ +18 +33 C3 +18 +33 Yes Swiss plant C4 +23 +38 C5 +23 +38 The spot exchange rate for euros is EUR/USD = 1.33, while the rate for Swiss francs is USD/CHF = 1.53. The interest rate is 4% in the United States, 3% in Switzerland, and 5% in the euro countries. The financial manager has suggested that, if the cash flows were stated in dollars, a return in excess of 9% would be acceptable. million million C6 +23 +38 a. Calculate the NPV in dollars for the German plant. Note: Do not round intermediate calculations. Enter your…