INTERMEDIATE FINAN...-MINDTAP(1 TERM)
14th Edition
ISBN: 9780357516720
Author: Brigham
Publisher: CENGAGE L
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Chapter 12, Problem 8MC
Summary Introduction
Case summary:
Person X is graduated from large university. He desired to become an entrepreneur. After death of his grandfather he got a business worth of $1million. Then he decided to buy minimum one franchise in the area of fast foods.an issue behind is that he will sell off investment after 3 years and go on to something else.
Person X has two alternatives franchise L and franchise S. Franchise L providing breakfast and lunch while franchise S is providing only dinner. Person X made evaluation of each franchise and find out that both have characteristics of risk and needs
Here are the net cash flows (in thousand $)
To determine: The profitability index (PI) of each franchises and the definition of PI.
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What is the full form of "YTD"?
a.Yield of Divergence
b.Year to Delivery
c.Year-to-date
d.Yield to Debit
Question Three
A company needs $10,000 in 5 years to replace a piece of equipment. How much must
be invested now at an interest rate of 8% p.a. compounded daily in order to provide
for this replacement?
Year
Free Cash Flow (FCF)
0
-$17,000,000
1
$4,980,000
2
$4,980,000
3
$4,980,000
4
$4,980,000
5
$6,980,000
The Net Present Value at a discount rate of 15%:
Present Value (PV) for each year:
PV(Year 1) = $4,980,000 ÷ (1 + 0.15)^1 = $4,330,435.
PV(Year 2) = $4,980,000 ÷ (1 + 0.15)^2 = $3,765,590.
PV(Year 3) = $4,980,000 ÷ (1 + 0.15)^3 = $3,274,426.
PV(Year 4) = $4,980,000 ÷ (1 + 0.15)^4 = $2,847,328.
PV(Year 5) = $6,980,000 ÷ (1 + 0.15)^5 = $3,477,617.
Sum of PVs = $4,330,435 + $3,765,590 + $3,274,426 + $2,847,328 + $3,477,617 = $17,695,396.
Initial Investment = $17,000,000.
NPV = Total PV - Initial Investment = $17,695,396 - $17,000,000 = $695,396.
Calculate The Internal Rate of Return
Chapter 12 Solutions
INTERMEDIATE FINAN...-MINDTAP(1 TERM)
Ch. 12 - What types of projects require the least detailed...Ch. 12 - Prob. 3QCh. 12 - Prob. 4QCh. 12 - Prob. 5QCh. 12 - A project has an initial cost of 40,000, expected...Ch. 12 - IRR Refer to Problem 12-1. What is the projects...Ch. 12 - Prob. 3PCh. 12 - Prob. 4PCh. 12 - Prob. 5PCh. 12 - Prob. 6P
Ch. 12 - Your division is considering two investment...Ch. 12 - Edelman Engineering is considering including two...Ch. 12 - Prob. 9PCh. 12 - Project S has a cost of $10,000 and is expected to...Ch. 12 - Prob. 11PCh. 12 - After discovering a new gold vein in the Colorado...Ch. 12 - Prob. 13PCh. 12 - Prob. 14PCh. 12 - The Pinkerton Publishing Company is considering...Ch. 12 - Shao Airlines is considering the purchase of two...Ch. 12 - The Perez Company has the opportunity to invest in...Ch. 12 - Filkins Fabric Company is considering the...Ch. 12 - The Ulmer Uranium Company is deciding whether or...Ch. 12 - The Aubey Coffee Company is evaluating the...Ch. 12 - Your division is considering two investment...Ch. 12 - The Scampini Supplies Company recently purchased a...Ch. 12 - You have just graduated from the MBA program of a...Ch. 12 - Prob. 2MCCh. 12 - Define the term “net present value (NPV).” What is...Ch. 12 - Prob. 5MCCh. 12 - What is the underlying cause of ranking conflicts...Ch. 12 - Prob. 7MCCh. 12 - Prob. 8MCCh. 12 - Prob. 9MCCh. 12 - Prob. 10MCCh. 12 - In an unrelated analysis, you have the opportunity...Ch. 12 - Prob. 12MC
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