Forum Replies Created
- Posts
Hi All,
Just incase a tutor cannot help me with this the at moment could any of your explain the following?:
1) A company has sales of $200m per year. Receivable days are currently 40 days. Company are considering offering a 1% discount for payment within 15 days. 60% of customers are expected to take advantage of the discount. What is the effective annual cost of the discount? Answer: 15.8%….I have seen your working for this but keep on getting a different answer even when I am using brackets.
2) A company are considering investing in a new project which will cost $160,000 and have an expected life of 4 years and expected scrap value of $20,000. Anticipated net operating cash flows each year will be:
Year 1: $40,000
Year 2: $60,000
Year 3: $80,000
Year 4: $20,000The cost of capital is 10%. What is the ARR? Answer: 16.67%
3) A company has 3 projects with the following initial costs and NPV’s
Project A: $20,000 NPV: $2,000
Project B: $30,000 NPV $2,400
Project C: $10,000 NPV $1,200Capital available for investment is $40,000. Projects are divisible. What is the max NPV? Answer: $4,000
4) A company has just paid a dividend of $0.23/share. Shareholders are expecting the dividend to remain at $0.23/share next year but to increase at an average rate of 3% per annum there after. Shareholders required return is 12% and the rate of corporation tax is 25%. What will be the current market value per share? Answer $2.56
Many Thanks,
David
Hi John would you be able to help me with following:
1) A company has sales of $200m per year. Receivable days are currently 40 days. Company are considering offering a 1% discount for payment within 15 days. 60% of customers are expected to take advantage of the discount. What is the effective annual cost of the discount? Answer: 15.8%….I have seen your working for this but keep on getting a different answer even when I am using brackets.
2) A company are considering investing in a new project which will cost $160,000 and have an expected life of 4 years and expected scrap value of $20,000. Anticipated net operating cash flows each year will be:
Year 1: $40,000
Year 2: $60,000
Year 3: $80,000
Year 4: $20,000The cost of capital is 10%. What is the ARR? Answer: 16.67%
3) A company has 3 projects with the following initial costs and NPV’s
Project A: $20,000 NPV: $2,000
Project B: $30,000 NPV $2,400
Project C: $10,000 NPV $1,200Capital available for investment is $40,000. Projects are divisible. What is the max NPV? Answer: $4,000
4) A company has just paid a dividend of $0.23/share. Shareholders are expecting the dividend to remain at $0.23/share next year but to increase at an average rate of 3% per annum there after. Shareholders required return is 12% and the rate of corporation tax is 25%. What will be the current market value per share? Answer $2.56
Many Thanks,
David