1. Ang Electronics, Inc., has developed a new DVDR. If the DVDR is successful, the present value of the payoff...
1. Ang Electronics, Inc., has developed a new DVDR. If the DVDR is successful, the present value of the payoff (when the product is brought to market) is $22.1 million. If the DVDR fails, the present value of the payoff is $9.5 million. If the product goes directly to market, there is a 47 percent chance of success. Alternatively, Ang can delay the launch by one year and spend $1.1 million to test market the DVDR. Test marketing would allow the firm to improve the product and increase the probability of success to 76 percent. The appropriate discount rate is 8 percent.
Required: (a) Calculate the NPV of going directly to market now. (Do not include the dollar sign ($). Enter your answer in dollars, not millions of dollars. (e.g., 1,234,567))
(b) Calculate the NPV of test marketing first. (Do not include the dollar sign ($). Enter your answer in dollars, not millions of dollars (e.g., 1,234,567). Round your answer to 2 decimal places. (e.g., 32.16))
2. You are considering investing in a company that cultivates abalone for sale to local restaurants. Use the following information:
Sales price per abalone = $ 93.00 Variable costs per abalone = $ 5.90 Fixed costs per year = $ 690,000.00 Depreciation per year = $ 47,000.00 Tax rate = 33.00 %
The discount rate for the company is 11 percent, the initial investment in equipment is $329,000, and the project’s economic life is seven years. Assume the equipment is depreciated on a straight-line basis over the project’s life.
Requirement 1: What is the accounting break-even level for the project? (Round your answer to the nearest whole number. (e.g., 32))
Requirement 2: What is the financial break-even level for the project? (Round your answer to the nearest whole number. (e.g., 32))
3. We are examining a new project. We expect to sell 3,000 units per year at $52 net cash flow apiece for the next 15 years. In other words, the annual operating cash flow is projected to be $52 × 3,000 = $156,000. The relevant discount rate is 18 percent, and the initial investment required is $670,000. Suppose you think it is likely that expected sales will be revised upward to 3,900 units if the first year is a success and revised downward to 1,500 units if the first year is not a success. The project can be dismantled after the first year and sold for $520,000.
Required: (a) If success and failure are equally likely, the NPV of the project is ____$. Consider the possibility of abandonment in answering. (Do not include the dollar sign ($). Round your answer to 2 decimal places. (e.g., 32.16))
(b) The value of the option to abandon is ___$. (Do not include the dollar sign ($). Negative amount should be indicated by a minus sign. Round your answer to 2 decimal places. (e.g., 32.16))
4. You bought one of Bergen Manufacturing Co.’s 10 percent coupon bonds one year ago for $770. These bonds make annual payments and mature 10 years from now. Suppose you decide to sell your bonds today, when the required return on the bonds is 14 percent. If the inflation rate was 3.1 percent over the past year, your total real return on the investment was ______ percent. (Do not include the percent sign (%). Round your answer to 2 decimal places. (e.g., 32.16))"
Answer rating (rated one time)
Answer
body preview (14 words)
Please xxxx the attached xxxx and let me xxxx if need xxxx help.
xxxxxx
file1.doc preview (616 words)
xAng xxxxxxxxxxxx xxxxx xxx developed x new xxxxx If xxx DVDR is successful, the xxxxxxx xxxxx of xxx payoff (when the xxxxxxx xx xxxxxxx to xxxxxxx is xxxxx million. xx the xxxx fails, the present xxxxx xx xxx payoff xx xxxx xxxxxxxx If xxx xxxxxxx goes xxxxxxxx xx xxxxxxx xxxxx is a 47 percent chance xx success. Alternatively, Ang can delay xxx launch xx one xxxx xxx spend $1.1 xxxxxxx to test xxxxxx the xxxxx Test xxxxxxxxx would allow xxx firm xx improve the product and xxxxxxxx the xxxxxxxxxxx of xxxxxxx xx xx xxxxxxxx xxx appropriate discount rate is x percent. |
xxxxxxxxx |
xxx | Calculate the xxx |
xxx x CSuccess (Prob. of Success) + xxxxxxxx (Prob. xx xxxxxxxx | |
xxx x xxxxxxxxx (0.47) + xxxxxxxx xxxxxx | |
NPV x $15,422,000 | |
xxxxxxxxxxxxxxx xxx NPV xx xxxx marketing xxxxxx xxx xxx xxxxxxx xxx dollar sign xxxx xxxxx xxxx xxxxxx xx xxxxxxxx not millions xx dollars (e.g., 1,234,567). xxxxx your answer to x decimal xxxxxxx xxxxxx xxxxxxx | |
xxxx C0 + {[CSuccess (Prob. |
- - - more text follows - - -
Try it before you buy it |