Who gains and who loses from the following maneuvers? a. Circular scrapes up $5 in cash and pays a cash dividend. b. Circular halts operations, sells its fixed assets, and converts net working capital into $20 cash. Unfortunately the fixed assets fetch only $6 on the secondhand market. The $26 cash is invested in Treasury bills. c. Circular encounters an acceptable investment opportunity, NPV = 0, requiring an invest- ment of $10. The firm borrows to finance the project. The new debt has the same security, seniority, etc., as the old.

Who gains and who loses from the following maneuvers? a. Circular scrapes up $5 in cash and pays a cash dividend. b. Circular halts operations, sells its fixed assets, and converts net working capital into $20 cash. Unfortunately the fixed assets fetch only $6 on the secondhand market. The $26 cash is invested in Treasury bills. c. Circular encounters an acceptable investment opportunity, NPV = 0, requiring an invest- ment of $10. The firm borrows to finance the project. The new debt has the same security, seniority, etc., as the old.

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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firm is considering Projects S and L, whose cash flows are shown below. These projects are matually exclusive, equally ricky, and not repeatable. The CEO wants to use the IRR erterion, while the CFO favor the NPV method. You wer ired to advise the firm on the best procedure. If the wrong decision criterion is used, how much potential value would the firm lose? NACC CFS CFL Ⓒ422001 Ob121617 0 1440 O 4318224 O18647 0 $1.025 $2.150 1 5380 $765 $75 2 $380 3 $380 $765 4 1380 5765
Please correct answer and don't use hand rating
We have seen before that money deposited into an account with continuous interest follows the A = Pe' formula. However, this required strict conditions %3D that the money cannot be withdrawn or added to throughout the term of the investment. A more complicated model that allows for deposits/withdraws is: A (t) = Pert + K (ert – 1 | where K is the constant amount deposited (K> 0) or withdrawn (K < 0) each year. Problem: A $270,000 home mortgage with a rate of 5.3 % compounded continuously is borrowed for a period of 30 years. (A) Find the amount, K, that is needed to be paid off each year. (note: your K value should be negative because it is a "withdraw" from the principal, but your answer should be reported as a positive number) To pay off the loan in 30years, $ Number would need to be paid off each year. (round to the nearest cent) (B) Using the value found in part (A), how much money will be spent over the period of the loan repaying the initial balance of $270,000? $ Number (round…
The company. New Wifi, was in an unusual situation of being worth more dead than alive. What economic principle was violated when the owner Cabie Garfield tried to get control of the fim, break it up sell the assets and make a profit? Select one Oa Externalties Ob. Diminishing marginal retum O The law of one price Od Non-positive marginal utility of wealth O e. Diminishing marginal utility of wealth
Suppose the management of a firm is trying to allocate liquid assets to two accounts, one of which is riskless but pays no interest, while the other offers a risky return. Assume the rate of return r on the second account is uniformly distributed over the range [-0.5, 0.5]. Let R denote the amount currently available for allocation to the two accounts, and S denote the amount invested in the risky asset. Suppose management would like to make the next period investment value as large as possible but subject to the condition that R + Sr not fall below 95% of the original value of R too often so that if the investment falls below 95% of its original value, it should not do so more than 25% of the time. Calculate the ratio of investment and the amount available, that is, a = R
To solve for the FV of the cash flow stream with a calculator that doesn’t havethe NFV key, do the following:Enter N = 6, I/YR = 8, PV = -923.98, and PMT = 0.Solve for FV = $1,466.24. how can I apply this on Excel for some reason it doesn't allow me or give me answer
An investment with a positive total cash flow will always outperform an investment that shows negative cash flow in the first years of operation. A. True B. False
Uneven Cash Flow Stream Find the present values of the following cash flow streams. The appropriate interest rate is 12%. (Hint: It is fairly easy to work this problem dealing with the individual cash flows. However, if you have a financial calculator, read the section of the manual that describes how to enter cash flows such as the ones in this problem. This will take a little time, but the investment will pay huge dividends throughout the course. Note that, when working with the calculator's cash flow register, you must enter CF0 = 0. Note also that it is quite easy to work the problem with Excel, using procedures described in the Ch04 Tool Kit.xlsx.) Do not round intermediate calculations. Round your answers to the nearest cent. Year Cash Stream A Cash Stream B 1 $100 $250 2 400 400 3 400 400 4 400 400 5 250 100 Stream A: $ Stream B: $ What is the value of each cash flow stream at a 0% interest rate? Round your answers to the nearest dollar. Stream…
Suppose Leonard, Nixon, & Shull Corporation’s projected free cash flow (FCF) for next year is $750,000, and FCF is expected to grow at a constant rate of 4% indefinitely. If the company’s weighted average cost of capital is 10%, what is the value of its operations? a. $18,750,000 b. $12,500,000 c. $7,500,000 d. $13,000,000 e. $10,833,333
Am. 121.
Please give me full explanation Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.

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