Solution Library

Time Value of Money and Setting Aside Money for buying new Equipment

Question 1. You just won the lottery! As your prize you will receive $1,200 a month for 100 months. If you can earn 8% on your money, what is this prize worth to you today? a.    $87,003.69 b.    $87,380.23 c.    $87,962.77 d.    $88,104. ... Read More

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Choose business with high cash flows and amount of salary increase after 15 years

Question 1. Marko, Inc. is considering the purchase of ABC Corporation.  Marko believes that ABC can generate cash flows of $5,000, $9,000 and $15,000 over the next three years, respectively. After that time, Marko feels ABC will be worthless. Marko has determined that a 14% rate of return is ... Read More

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When does NPV of an investment increases and calculating NPV with return rate

Question 1. All else constant, the net present value of a typical investment project increases when: a.    The discount rate increases. b.    Each cash inflow is delayed by one year. c.    The initial cost of a project increases. d.    Th ... Read More

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Calculate Payback Period and Discounted Payback Period

Question 1. It will cost $2,600 to acquire a small ice cream cart Cart sales are expected to be $1,400 a year for three years. After the three years, the cart is expected to be worthless as that is the expected remaining life of the cooling system. What is the payback period of the ice cream cart? ... Read More

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New Strategy for International Business from Finance Point of View

Question To introduce the CEO’s new strategy to the entire financial and accounting department, the CFO has asked you to create a PowerPoint presentation. As most of the department has not been involved in any kind of international finance or accounting, your presentation is meant to be both ... Read More

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Working Capital Challenges for International Operations

Question The components of a firm’s working capital are cash, accounts receivable, inventory, and accounts payable. Any CFO’s objective is to ensure that current assets less current liabilities—known as net working capital—is a positive number, while also not having an exces ... Read More

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Tax Liability for Income from other countries in the United States

Question As Pharma Heal Corporation has grown successful, so have Akosua and Isabella. With record sales this past year (thanks to the help of its international business consultant), Isabella realized the substantial income from a variety of sources in several nations. Assume that Isabella is a cit ... Read More

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Evaluate Projects with Cash Flows

Question Your company’s cost of capital is 12%.  You are currently evaluating three projects that have the following cash flow streams:   Cash Flows at Time t Project 0 1 2 3 4 A -10,000 4,000 4,000 4,000 ... Read More

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Calculating NPV for Two Potential Projects

Question Tri-City Industries is considering two possible capital projects. Project A requires an initial investment of $240,000 and provides cash flows before tax of $120,000 in year one, $140,000 in year two, and $160,000 in year three. If project A is accepted, project B may be undertaken. It pro ... Read More

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How to Calculate the Present Value of New Equipment

Question PC Shopping Network may upgrade its modem pool. It last upgraded 2 years ago, when it spent $115 million on equipment with a life of 5 years and a salvage value of $15 million. The old equipment can be sold today for $80 million. A technology consultant hired by PC Shopping Network has sug ... Read More

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Comparison of Depreciation between Two Machines

Question You have been asked to choose between two pollution devices. The “Wet Scrub” costs $1,000 to set up and $500 per year to operate. It must be completely replaced every 3 years and it will have a salvage value of $100 when replaced. The “Dry Scrub” device costs $2,000 ... Read More

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Calculate Returns for a New Machine for the Next 10 Years

Question Kenneth Su Gold Corp (KSGC) is considering the purchase of a new piece of machinery. The new machinery would cost $80,000. You are given the following facts: The new machine will replace an existing machine that has a current market value of $30,000. The new machine would reduce before ... Read More

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