Net Present Value of Mercury Athletic Enterprise The results of my financial analysis based on the Free Cash Flow Method considering the base case of financial projections and assumptions for Mercury Athletic Footwear collated and developed by John Liedtke indicate that that the project to acquire Mercury Althletic has a positive net present value at $243,025 (in thousands) [ given by PV(FCF)=86,681+ PV (Terminal Value) =156,343] which is also greater than the recommended acquisition price of $186
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(purchase price minus salvage value), interest on the money invested, repairs for normal use, property taxes, and insurance. Repairs, property taxes, and insurance are usually rough estimates by percentage of price, with increases in repairs assumed to offset decreases in the other two. Interest is often loosely accounted for multiplying an average value of the item by an interest rate (discount, opportunity, MARR). This is crude and can be improved by using time value of money to convert price and
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Solutions to Chapter 4 The Time Value of Money 1. a. b. c. d. $100/(1.08)10 = $46.32 $100/(1.08)20 = $21.45 $100/(1.04)10 = $67.56 $100/(1.04)20 = $45.64 $100 × (1.08)10 = $215.89 $100 × (1.08)20 = $466.10 $100 × (1.04)10 = $148.02 $100 × (1.04)20 = $219.11 2. a. b. c. d. 3. $100 × (1.04)113 = $8,409.45 $100 × (1.08)113 = $598,252.29 4. With simple interest, you earn 4% of $1,000 or $40 each year. There is no interest on interest. After 10 years, you earn total interest of $400
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BUSINESS 111 FALL 2011 NON-BBA FINAL EXAM REVIEW GUIDE Final Exam Date: FRIDAY, DECEMBER 9TH, 2011 Exam Time for WLU Students: 7:00 p.m. – 9:30 p.m. Exam Time for UW Students: 7:30 p.m. – 10:00 p.m. Writing Locations posted at https://www.wlu.ca/~mibrahim/exams/FALL2011/BUSINESS.html Important Notice: If a student cannot write a business or economics final exam as scheduled, they must submit a "Petition for Exception to Academic Regulations" form to Ms Lee Leeman, Student and
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a bond. The coupon rate is the annual coupon divided by the face value of the bond. The coupon rate will remain the same. If the bond is issued with a 8% coupon rate but the YTM is 10% the bond will still have an 8% coupon rate it would just be sold at a discount because the price of the $1,000 bond has now decreased to match the 10% YTM. Q7-4) Original Bond: Present Value: $1,000/1.09(9)=$460.43 Annuity Present Value: $90 x (1-1/1.09(9))/.09 =$90 x (1-1/2.171893279)/.09
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Introduc)on to financial management WEEK 1 Chapter 1 & 2 1 Expectations • A#end all classes with copies of slides. • Read the text book. • A#end all tutorials and par)cipate. • Complete the weekly quizzes and assignments. • If you are struggling • A#end consulta@on • A#end PAL. • Don’t leave it to the last week. 2 The objective of managers • Should be to maximise the wealth of the shareholders • A company also has other stakeholders that rely on it, for example:
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(1+I)10 =2 or, 2 = 1 (1+r)10 (1+I)=2 (1/10) or, 2/1 = (1+r) 10 1+I = or, (1+r)10 = 2 I= or, (1 + r) = 2(1/10) or, (1 + r) = 2(0.1) or, (1 + r) = 1.0718 Time Value of Money Assignment 1a PV RATE #PER PMT FV TYPE 50,000 0 10 0 0 ($50,000.00) b 50,000 0.05 10 0 0 ($81,444.73) c 50,000 0.1 10 0 0 ($129,687.12) 2a -25,000 0 5 0 25,000
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and performance objectives. 2. Determine Timing of initial and future activities of the asset or project design and each of the alternatives. 3. Estimate the costs involved for each alternative. 4. Find the present value of each alternative through “discounting." 5. Analyze the results. Develop Design Alternatives Identify and develop a minimum of two mutually exclusive options that serve the same purpose, with the assumption
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The expected monthly payments for the 30-year traditional and the 20-year traditional loan can be calculated using the Annuity present value equation (PVA). According to the case study for S&S Air, the loan officer states that, both the 30-year loan and the 20-year loan will have an APR of 6.1 percent. A portion of the PVA equation is based on the present value equation multiplied by the C dollars of the dollar amount borrowed (Ross, Westerfield, & Jordan, 2012). The set up for the equations are
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27 The Basic Tools of Finance TRUE/FALSE 1. If the interest rate is 8 percent, then the present value of $1,000 to be received in 4 years is $735.03. ANS: T DIF: 2 REF: 27-1 NAT: Analytic LOC: The Study of economics, and definitions of economics TOP: Present value MSC: Applicative 2. If a savings account pays 5 percent annual interest, then the rule of 70 tells us that the account value will double in approximately 14 years. ANS: T DIF: 2 REF: 27-1 NAT: Analytic LOC: The Study of
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