FI515Quiz2Part2

FI515Quiz2Part2 - (250,000) (250,000) CF (2,100,000)...

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FI515 Quiz 2 Part 2 1 IRR for Machine A: CF 1 = -2,000; CF 2 =0; CF 3 =0, DF 4 = 3,877, so IRR will be 17.9958% IRR for machine B: CF 1 = 832; CF 2 =832; CF 3 =832, DF 4 = 832, so IRR will be 24.0099% Machine B will better because it has greater IRR.  2 Year: 1 2 3 4 Cost (2,000,000) Inventory (140,000) A/P 40,000 Sales 1,000,000 2,000,000 1,000,000 2,000,000 Operating cost (500,000) (1,000,000) (500,000) (1,000,000) Depreciation (500,000) (500,000) (500,000) (500,000) EBT: 0 500,000 0 500,000 Tax(40%) 200,000 200,000 Net income 300,000 300,000 Return of NWC 100,000 +Depreciation                         500,000 500,000 500,000 500,000 After tax CF (2,100,000) 500,000 800,000 500,000 900,000 Reduce CF                            (250,000) (250,000)
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Unformatted text preview: (250,000) (250,000) CF (2,100,000) 250,000 550,000 250,000 650,000 NPV= 847,297.2687 3 Capacity Sales: $200/.08= $250 Target FA/S ratio= 90/240= 0.3750 Target FA= 0.3750*240= 90 Additional to RE= M(S 1 )(1- payout ratio)= 0.05(240)(0.4)= 4 Cash 50 A/P 50 A/R 50 N/P 20 Inventory 50 long term debt 40 Fixed Assets 18 Common stock 40 Total 168 R/E 14 164 AFN=168-164= 4 4 Ks= 0.07+(.11+0.07)2 K s = 15% D = 3, D 1 = 3.6, D 2 = 4.32, D 3 =4.7520 P 2 = 4.7520/(0.15 0.10) = 95.04 P o = ?; CF = 0; CF 1 = 3.6, CF 2 = 99.36, I = 15% P = 78.2608 Dividend yield= D 1 /P Dividend yield= 3.6/78.2608 = 4.6%...
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FI515Quiz2Part2 - (250,000) (250,000) CF (2,100,000)...

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