13. a) Suppose on January 1 you deposit $2,750 in an account that pays a quoted interest rate of 2.35% (APR), with interest added (compounded) daily. How much will you have in your account on October 1, or after 9 months? (assume N = 273 days) Recall that the interest rate (I/Y) represents the periodic rate based on how many times per YEAR the interest is compounded. Hint, this is 365 times per year. As above, and all TVM type problems, there should be no interim rounding of the interest rates. b) Now suppose you leave your money in the bank for 21 months. Thus, on January 1 you deposit $2,750 in an account that pays an APR of 2.35% compounded daily. How much will be in your account on October 1 of the following year? (assume N = 638 days) 2
-Mr Michael Maguire lives in Wombat, in the central west of New South Wales. Michael owns a 3000 acre
-Mr Michael Maguire lives in Wombat, in the central west of New South Wales. Michael owns a 3000 acre farm in Young, and the main crop he grows is cherries. He has decided he needs to acquire a better and more efficient spraying machine. -Some specialist spraying machines are available in Toronto, Canada at the firm Maple Partners Agricultural Supplies at the retail outlets of the pastoral company. Last month Michael flew to Toronto on Air Canada Flight AC31 for $2520 return. Michael stayed overnight in Toronto as a guest of Maple Partners Agricultural Supplies and so did not incur any accommodation expenses. In Toronto, Michael saw three different spraying machines, but he was unsure which one he should buy. They are all new and all manufactured in either Canada or United States. -One week ago Michael decided that the decision was a lot more complex than he could have imagined and decided to ask a consultant, Mrs Lynette Lowry, to advise on which of the three machines he should purchase. Lynette is an agricultural consultant, with an honours degree in Agricultural Economics although she did fail her second year accounting course. Michael has just received Mrs Lowry’s report, which recommends the purchase of the Presetter 3000 Spraying Machine, which in Australian dollars will cost $400,000. Mrs Lowry charged $4,000 for his report, an expense which Michael can claim on tax. The Presetter 3000 machine is manufactured in Quebec, Canada. -Michael’s next step is to determine if the purchase of the Presetter 3000 machine is financially viable, or whether he should stay with his existing machine, a Dutch machine. -If Michael buys the Presetter 3000 machine, he will fund it with $140,000 cash he has on hand plus a loan of $260,000 from Westpac. The loan will be at a fixed rate of 8% p.a. over 5 years, with interest only payable at the end of each year. The principal of $260,000 is repayable at the end of the fifth year. -Michael estimates that he would keep the Presetter 3000 machine for five years, after which time he should be able to sell it locally for $50,000. He therefore plans to depreciate it straight line to zero over five years, even though the Australian Tax Office has ruled that similar harvesters from Canada have an economic life of eight years. -The old machine was purchased five years ago and at that time was expected to have an economic life of nine years. It cost $180,000 and Michael has been depreciating it using straight-line depreciation over nine years. The Dutch machine is being depreciated to zero. If Michael buys the Presetter 3000 machine, he is confident of being able to sell his Dutch machine online on Gumtree. The sale on Gumtree would occur as soon as Michael receives the new Presetter 3000 machine (i.e. Period 0). Michael expects he will receive $70,000 if he sells the old machine. Michael believes the remaining economic life of the old machine is 4 years. -The Presetter 3000 machine is state-of-the-art, and much more efficient than the Dutch machine. The Dutch machine costs $160,000 per annum to operate, whereas the Presetter 3000 machine will only cost about $125,000 per annum to operate. -Due to the different manner in which the Presetter 3000 machine sprays, it will be necessary to purchase an additional $50,000 of inventory in year 0. Michael will be able to recover this cost when he disposes of the Presetter machine in five years’ time. -One of the problems in Young is flying foxes, who love eating young cherries. For the last few years Michael has employed Mr Kelvin King, a professional flying fox trapper, to trap and remove flying foxes on a part-time basis. His annual salary is $14,000, which will stay the same if this new cherry spraying machine is purchased. Michael believes that this amount should be tax deductible. -Michael has thought very carefully about all the implications of buying the new machine. He is confident that if he does continue to use the Dutch machine (rather than buying the new Presetter 3000 one), then the Dutch machine will continue to work well, and in fact he could probably get about $20,000 when he disposes of it in the future. Michael is not sure how to handle this figure in his calculations -The appropriate required rate of return for these agricultural projects is 13% in nominal terms. The corporate tax rate is 15%. Assume tax is paid in the year of income. Inflation is projected to be 3.1% per annum for the foreseeable future. The cash flows given above are all in real terms. -The new machine will generate yearly revenue of $3m while the old machine was only able to generate annual revenue of $2m) The amount paid to Mrs Lynette Lowry for her report that should be included in the NPV calculation of the new machine [see paragraph #3] 2) The loan from Westpac [paragraph #5] to be included in the NPV calculation is:3) The cost of the airfares on Air Canada, from Sydney to Toronto return [see paragraph #2] to be included in the NPV calculation is:4) The depreciation tax shield (tax benefit per annum) for the new machine is5) The lost depreciation tax shield (tax benefit per annum) for the old machine is:6) Michael has to purchase additional inventory (packaging material) which is included in the year 0 cash flow. [see paragraph #9]. What is the tax impact in dollar terms in year 0? 7) The Cash Flow in period 0 is 8) The appropriate discount rate to use in deciding whether Michael should buy the new Presetter 3000 machine is [see paragraph #12]9) The Free Cash Flow in year 5 is:
Identify which statement is notSelect one: correct in relation to M
Identify which statement is notSelect one: correct in relation to M
White Corporation has just paid an annual dividend of 2 dollars per share. It is expected that the dividend will
White Corporation has just paid an annual dividend of 2 dollars per share. It is expected that the dividend will grow at 10 percent per year in the next four years. Thereafter, the growth rate will remain constant at 5 percent indefinitely. The appropriate discount rate is 16 percent.(a): What will be the share worth in four years (i.e., at the end of year four)?(b): What is the current share value for White Corporation?
Kinston Limited is considering investing in new equipment that will cost 126000 dollars and will last for three years. The
Finance Assignment Writing ServiceKinston Limited is considering investing in new equipment that will cost 126000 dollars and will last for three years. The equipment will be fully depreciated using the straight-line method. The equipment will generate revenues of 115000 dollars each year and the cost of goods sold will be 50% of sales. At the end of year three, the equipment will be sold for 15000 dollars. The appropriate cost of capital is 10% and Kinston’s tax rate is 35%.What is the free cash flow in the final year (i.e., free cash flows in year three)?
The Courage Brewery has just purchased an asset they intend to use in their business. The machine has a cost
The Courage Brewery has just purchased an asset they intend to use in their business. The machine has a cost of $20m and they intend to depreciate this for 10 years straight line. The taxation office has determined that this be depreciated over 20 years straight line.The project they are undertaking will last 15 years and the asset will be sold at that time for $2m. Calculate the after-tax salvage CF in Year 15? Assume a 30% tax rate. (2 marks)
Alpha has exhibited a standard deviation in share returns of 0.7, whereas Beta has exhibited a standard deviation of 0.8.
Alpha has exhibited a standard deviation in share returns of 0.7, whereas Beta has exhibited a standard deviation of 0.8. The correlation coefficient between the share returns of Alpha and Beta is 0.1. What is the standard deviation of a portfolio composed of 61 percent Alpha and 39 percent beta
Why are original owners of a business not upset by the concept of “money left on the table”? Select one:
Why are original owners of a business not upset by the concept of “money left on the table”? Select one: a. If shares offered in the IPO represent a small part of the total number of shares on issue after the offer, then the original owners retain the majority stake in the company. Consequently, any post-listing increase in the share price above the IPO subscription/offer price would benefit the original shareholders.b. After an IPO is completed and the company listed on an Exchange, there will be no money left on the table.c. If new shares offered via the IPO represent a large part of the total number of shares on issue after the offer, and the original owners do not participate in the IPO, then any post-listing decline in the share price due to ‘money left on the table’ would not impact the original shareholders’ wealth.d. Original owners divest (sell) all their shares before the IPO, thus avoiding any “money being left on the table”.e. If the original owners retain a small minority stake in the company after the IPO, then IPO underpricing does not impact their investment value materially.
Your rich uncle has just offered you to make you wealthy! For every amount you save in an insured bank
Your rich uncle has just offered you to make you wealthy! For every amount you save in an insured bank account during the next 10 years, he will give you the total amount (excluding interest) that you saved to match it. Because your modest income permits you to save P2,000 per month for the next 10 years, your uncle will be willing to give you 240,000 at the end of the 10th year. If you desire a total of P1,00,000 10 years from now, what effective interest rate would you have to earn on your insured bank account to make your goal possible?
suppose ethical genetic engineering company intends to enter the retailing industry and considers establishing a large supermarket in local area.
suppose ethical genetic engineering company intends to enter the retailing industry and considers establishing a large supermarket in local area. the company comes to consultant with you regrading the oppurtunity cost of capital for this new investment project. your assistant jennifer a graduate argues that the company should use WACC as the benchmark rate of return in evaluating this new project. do u agree with jennifer? explain why?
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