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- Micheal’s Machinery is a German multinational manufacturing company. Currently, Micheal’s financial planners are considering undertaking a 1-year project in the United States. The project's expected dollar-denominated cash flows consist of an initial investment of $2000 and a cash inflow the following year of $2400. Micheal’s estimates that its risk-adjusted cost of capital is 12%. Currently, 1 U.S. dollar will buy 0.7 Germany. In addition, 1-year risk-free securities in the United States are yielding 6.5%, while similar securities in Germany’s are yielding 4.5%. If this project was instead undertaken by a similar U.S.-based company with the same risk-adjusted cost of capital, what would be the net present value and rate of return generated by this project? Round your answers to two decimal places. What is the expected forward exchange rate 1 year from now? Round your answer to two decimal places. If Micheal undertakes the project, what is the net present value and rate of return of…Assuming PepsiCola, Atlanta is considering of giving its main rival a strong competition, in the launch of a product (two-in-one beverage) for a new market. The company requires an amount of $15,000,000.00 as the initial cost of plant/equipment for the products developed by its R&D research group to cover the project life cycle of eight years. For each year, 500,000 units would be produced. The selling price of a unit of the new product is $8.50. It is expected that in year two (2), the selling price of a unit will increase by 25%; year three (3) the unit will be selling by a further increase by 10% from year two (2)s selling price. From year four (4), the selling price will decrease by 5% from year three (3)s selling price and the subsequent years will stabilize or remain till the end of the project life and further. The production department estimated cost of each unit for 1st year as $2.75, it will increase in 2nd year by 25%; In the 3rd year, will increase by 10% from the…The following project takes place over a 20 year period of time. Suppose that an electric motor factory will take a year to build : $7 million is spent right away and another $7 million is spent at the end of the first year. Also, suppose the factory is expected to lose $1.0 million at the end of year two and $0.5 million at the end of year three. At the end of each of the years, four through 20, it will earn $1.08 million, when it will be scrapped for $1.0 million at the end of year 20. If the discount rate is 3 percent, what is the NPV in million? Is the investment worthwhile?
- U.S. Steel is considering a plant expansion to produce austenitic, precipitation hardened, duplex, and martensitic stainless steel round bars that is expected to cost $17 million now and another $10 million 1 year from now. If total operating costs will be $1.4 million per year starting 1 year from now, and the estimated salvage value of the plant is virtually zero, how much must the company make annually in years 1 through 11 to recover its investment plus a return of 23% per year? The company must make S million annually in years 1 through 11 to recover its investment plus a return of 23% per year.Imperial Motors is considering producing its popular Rooster model in China. This will involve an initial investment of CNY 5.3 billion. The plant will start production after one year. It is expected to last for five years and have a salvage value at the end of this period of CNY 513 million in real terms. The plant will produce 100,000 cars a year. The firm anticipates that in the first year, it will be able to sell each car for CNY 78,000, and thereafter the price is expected to increase by 4% a year. Raw materials for each car are forecasted to cost CNY 31,000 in the first year, and these costs are predicted to increase by 3% annually. Total labor costs for the plant are expected to be CNY 2.4 billion in the first year and thereafter will increase by 7% a year. The land on which the plant is built can be rented for five years at a fixed cost of CNY 313 million a year payable at the beginning of each year. Imperial’s discount rate for this type of project is 10% (nominal). The…You have been given the following information on a project: It has a 3-year lifetime The initial investment in the project will be $28 million, and the investment will be depreciated straight-line, down to a salvage value of $6 million at the end of the fourth year. The revenues are expected to be $20 million next year and to grow 6% a year after that for the remaining two years. The cost of goods sold, excluding depreciation, is expected to be 53% of revenues. The tax rate is 0.36. Estimate the after-tax return on capital, by year, to find the average for the project. (Round answer to four decimal places.)
- The Philippines’ Bench clothing has just completed a feasibility study of what to do with the 16,000 kg of overruns, rejects, and remnants it produces every year. The company’s CEO launched the feasibility study by asking, why pay someone to dig coal out of the ground and then pay someone else to put our waste into a landfill? Why not just burn our own waste? The company is proposing to build a P10 million power plant to burn its waste as fuel, thereby saving P2.8 million a year in coal purchases. Company engineers have determined that the waste burning plant will be environmentally sound, and after its four-year study period the plant can be sold to a local electric utility for $5 million. What is the IRR of this proposed power plant? If the firm’s MARR is 15% per year, should this project be undertaken?A US multinational corporation has operations in Bolivia through which it plans to sell a new product of 500,000 cans of beans per year for the next 3 years, at a price of BOB 4 per can after incurring a variable cost of BOB 2.50 per can. The company will also incur a fixed cost of BOB 120,000 per year. The company has invested BOB 900,000 today in manufacturing equipment for its Bolivian operations, which will be depreciated at $300,000 annually over its 3-year life. The corporation's required rate of return (WACC) is 20% and has a tax rate of 25%. The spot rate was BOB 6.91/$ before it unexpectedly changed to BOB 7.25/$. What is the value of the Bolivian operations prior to the unexpected change in the spot rate assuming that the operations have a 3-year life only? (round to the nearest dollar) US$237,699 US$107,453 US$159,076 88 US$166,903Assuming PepsiCola, Atlanta is considering of giving its main rival a strong competition, in the launch of a product (two-in-one beverage) for a new market. The company requires an amount of $15,000,000.00 as the initial cost of plant/equipment for the products developed by its R&D research group to cover the project life cycle of eight years. For each year, 500,000 units would be produced. The selling price of a unit of the new product is $8.50. It is expected that in year two (2), the selling price of a unit will increase by 25%; year three (3) the unit will be selling by a further increase by 10% from year two (2)s selling price. From year four (4), the selling price will decrease by 5% from year three (3)s selling price and the subsequent years will stabilize or remain till the end of the project life and further. The production department estimated cost of each unit for 1st year as $2.75, it will increase in 2nd year by 25%; In the 3rd year, will increase by 10% from the…
- GeoSourcex is considering opening a new titanium mine. Once in operation, the mine is expected to produce positive net cash flows in perpetuity starting 3 years from now at $19.5 million per year but declining at a constant rate of 1.8% per year. The costs of getting the mine operational include an immediate payment of $110.0 million to purchase the land and acquire the mineral rights, plus other start -up costs of $10.0 million per year for three years starting in one year. If the project's cost of capital is 10.2% per year (compounded annually) what is the Net Present Value of this new mine?You are considering constructing a new plant in a remote wilderness area to process the ore from a planned mining operation. You anticipate that the plant will take a year to build and cost $104 million upfront. Once built, it will generate cash flows of $18 million per year starting two years from today. In 21 years, after its 20th year of operation, the mine will run out of ore and you expect to pay $256 million to shut the plant down and restore the area to its pristine state. Using a cost of capital of 13%: a. What is the NPV of the project? b. Is using the IRR rule reliable for this project? Explain. c. What are the IRRs of this project? a. What is the NPV of the project?The Logan Well Services Group is considering two sites for storage and recovery of reclaimed water. The mountain site (MS) will use injection wells that cost $4.2 million to develop and $280,000 per year for M&O. This site will be able to accommodate 150 million gallons per year. The valley site (VS) will involve recharge basins that cost $11 million to construct and $400,000 per year to operate and maintain. At this site, 720 million gallons can be injected each year. If the value of the injected water is $3.00 per thousand gallons, which alternative, if either, should be selected according to the B/C ratio method? Use an interest rate of 8% per year and a 20-year study period. The B/C ratio is . Select alternative (Click to select) neither of the alternatives mountain site valley site .