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borishaifa [10]
3 years ago
5

Bruno's Lunch Counter is expanding and expects operating cash flows of $26,900 a year for 6 years as a result. This expansion re

quires $92,700 in new fixed assets. These assets will be worthless at the end of the project. In addition, the project requires $6,600 of net working capital throughout the life of the project. What is the net present value of this expansion project at a required rate of return of 13 percent?
Business
1 answer:
8090 [49]3 years ago
4 0

Answer:

Net present value of this expansion project is 8234.

Explanation:

To get the net present value,  we make a cash-flow in excel. See document attached.

At moment 0 the investment is =$(92.700), also we consider the working capital =(6.600)

Moment 1 to 6 = $26.900

We calculate the Net cash flow (that is the difference between benefits and cost).

To get net present value, we use VNA formula.  ( =VNA(required rate of return; Net cash flow from moment 0 to moment 6) +Net cash flow at moment 0)

Net present value is 8234

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Ackert Company's last dividend was $1.55. The dividend growth rate is expected to be constant at 1.5% for 2 years, after which d
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Answer:

$37.05

Explanation:

Data provided in the question:

last dividend, D0 = $1.55

Dividend growth rate, g = 1.5% = 0.015

growth rate after 2 year = 8.0% = 0.08

Required rate of return , r= 12% = 0.12

Now,

Year 1 dividend =  $1.55 × ( 1 + 0.015 ) = $1.57325

Year 2 dividend = $1.57325 × ( 1 + 0.015 ) = $1.5968

Stock price after year 2 = [ $1.5968 × ( 1 + 0.08) ] ÷ (0.12 - 0.08)

= $43.11

Therefore,

The current stock price = amounts discounted back to the present at the required rate of return

= ( $1.57325 ÷ 1.12 ) + ( 1.5968 ÷ 1.12² ) + ( $43.11 ÷ 1.12² )

= $37.05

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