- Caledonia is considering two additional mutually exclusive projects the cash flows associated with these projects are as follows year project a project b 0 100 000 100 000 1 32 000 0 2 32 000 0 3 32 000 0 4 32 000 0 5 32 000 200 000 the required rate of return on these projects is 11 percent what is each project s payback period what is each project s net present value what is each project s internal rate of return what has caused the ranking conflict which project should be accepted why

- You need a fixed rate mortgage to buy a new home for 240 000 your mortgage bank will lend you the money at a 7 5 percent apr for this 25 year 300 month loan with interest compounded monthly you put 10 of the purchase price down on the house and finance the remaining balance what is your monthly payment on this loan

- Cost of living in a 195 000 dollar house

- 11 caledonia is considering two investments with one year lives the more expensive of the two is the better and will produce more savings assume these projects are mutually exclusive and that the required rate of return is 10 percent given the following after tax net cash flows year project a project b 0 195 000 1 200 000 1 240 000 1 650 000 a calculate the net present value b calculate the profitability index c calculate the internal rate of return d if there is no capital ration

- In finance how do you calculate interest if how much would sauer food company save in interest over the three year life of the computer system if the one year loan is utilized and the loan is rolled over reborrowed each year at the same 8 percent rate compare this to the 10 percent three year loan what if interest rates on the 8 percent loan go up to 13 percent in year 2 and 18 percent in year 3 what would be the total interest cost compared to the 10 percent three year loan

- Stern educational tv inc has decided to buy a new computer system with an expected life of three years at a cost of 200 000 the company can borrow 200 000 for three years at 12 percent annual interest or for one year at

- Caledonia is considering two investments with one year lives the more expensive of the two is the better and will produce more savings assume these projects are mutually exclusive and that the required rate of return is 10 percent given the following after tax net cash flows year project a project b 0 195 000 1 200 000 1 240 000 1 650 000 calculate the net present value calculate the profitability index calculate the internal rate of return if there is no capital rationing constraint which project should be selected if there is a capital rationing constraint how should the decision be made

- Procter micro computers inc requires 1 200 000 in financing over the next two years the firm can borrow the funds for 2 years at 9 5 percent interest per year mr procter decides to do economic forecasting and determines that is he utilizes short term financing instead he will pay 6 55 percent interest in the first year and 10 95 percent interest in the second year determine the total two year interest cost under each plan which play is less costly

- To the assistant financial analyst from mr v morrison ceo caledonia products re cash flow analysis and capital rationing we are considering the introduction of a new product currently we are in the 34 percent marginal tax bracket with a 15 percent required rate of return or cost of capital this project is expected to last five years and then because this is somewhat of a fad pro

- Procter micro computers inc required 1 200 000 in financing over the next two years the firm can borrow the funds for two years at 9 5 percent interest per year mr procter decides to do economic forecasting and determines that if he utilizes short term financing instead he will pay 6 55 interest in the first year and 10 95 percent interest in the second year determine the total two year interest cost under each plan which plan is less costly

- Stern educational tv inc has decided to buy a new computer system with an expected life of three years at a cost of 200 000 the comapany can borrow 200 000 for three years at 12 percent annual interest or for one year at 10 percent annual interest

- Re cash flow analysis and capital rationing we are considering the introduction of a new product currently we are in the 34 percent marginal tax bracket with a 15 percent required rate of return or cost of capital this project is expected to last five years and then because this is somewhat of a fad project to be terminated the following information describes the new project cost of new plant and equipment 7 900 000 shipping and installation costs 100 000 unit sales year units sold 1 70 000 2 120 000 3 140 000 4 80 000 5 60 000 sales price per unit 300 unit in years 1 4 260 unit in year 5 variable cost per unit 180 unit annual fixed costs 200 000 working capital requirements there will be an initial working capital requirement of 100 000 just to get production started for each year the total investment in net working capital will be equal to 10 percent of the dollar value of sales for that year thus the investment in working capital will increase during years 1 through 3 then decrease in year 4 finally all working capital is liquidated at the termination of the project at the end of year 5 the depreciation method use the simplified straight line method over five years it is assumed that the plant and equipment will have no salvage value after five years 1 should caledonia focus on cash flows or accounting

- You need a 25 year fixed rate mortgage to buy a new home for 240 000 your mortgage bank will lend you the money at a 7 5 percent apr for this 300 month loan with interest compounded monthly however you can only afford monthly payments of 850 so you offer to pay off any remaining loan balance at the end of the loan in the form of a single balloon payment what will be the amount of the balloon payment if you are to keep your monthly payments at 850

- Needs a 25 year fixed rate mortgage to buy a new home for 240 000 her mortgage bank will lend her the money at a 7 5 percent apr for this 300 month loan with interest compounded monthly however she can only afford monthly payments of 850