Iridium Corp. has spent $3.5 billion over the past decade developing satellitebased a telecommunication system. It is currently trying to decide whether to spend an additional $350 million on the project. The firm expects that this outlay will finish the project and will generate cash flow of $15 million per year over the next 5 years. A competitor has
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- Ang Electronics, Incorporated, has developed a new mesh network. If successful, the present value of the payoff (when the product is brought to market) is $34.9 million. If the mesh network fails, the present value of the payoff is $12.9 million. If the product goes directly to market, there is a 50 percent chance of success. Alternatively, the company can delay the launch by one year and spend $1.39 million to test market the mesh network. Test marketing would allow the firm to improve the product and increase the probability of success to 80 percent. The appropriate discount rate is 11 percent. Calculate the NPV of going directly to market and the NPV of test marketing before going to market. (Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234, 567.) PLEASE GIVE WHOLE NUMBERS Go to market now first Test marketingGeoSourcex is considering opening a new titanium mine. Once in operation, the mine is expected to produce positive net cash flows in perpetuity starting 3 years from now at $19.5 million per year but declining at a constant rate of 1.8% per year. The costs of getting the mine operational include an immediate payment of $110.0 million to purchase the land and acquire the mineral rights, plus other start -up costs of $10.0 million per year for three years starting in one year. If the project's cost of capital is 10.2% per year (compounded annually) what is the Net Present Value of this new mine?Ang Electronics, Incorporated, has developed a new mesh network. If successful, the present value of the payoff (when the product is brought to market) is $33.6 million. If the mesh network fails, the present value of the payoff is $11.6 million. If the product goes directly to market, there is a 40 percent chance of success. Alternatively, the company can delay the launch by one year and spend $1.26 million to test market the mesh network. Test marketing would allow the firm to improve the product and increase the probability of success to 70 percent. The appropriate discount rate is 12 percent. Calculate the NPV of going directly to market and the NPV of test marketing before going to market. (Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.) Answer is complete but not entirely correct. Go to market now $ Test marketing first IS 20,400,000 22,850,000 Should the firm conduct test…
- Consider the following information. In order to satisfy a sharp increase in demand due to the end of the pandemic, LLC is evaluating investing in one of two major projects; these projects will be called Project A and Project B. In order to mitigate risk, LLC has asked Rachel Consulting Limited to conduct some market research. Rachel Consulting is being paid $2.5m a fixed fee for her expert consulting services. Project A has an initial outlay of $45 million and Project B has an initial outlay of $60 million. Project A will generate additional revenues of $25 million starting at the end of year 1 until the end of year 10. It will also incur additional working capital expenses of $75 million immediately, this working capital will be recovered at the end of the project. Project B will generate additional revenues of $35 million starting at the end of year 1 until the end of year 10. It will also incur additional working capital expenses of $90 million immediately, this working capital will…Caroline’s Chill Chronometers (3C) is considering buying a machine for $600 million. The machine has a useful life of 20 years. Sales are projected to be $120 million per year, with operating expenses of $35 million per year. An initial NWC investment of $10 million would be needed. NWC, however, would decrease by $300,000 per year over the 15 year life of the project due to improved inventory efficiency. The machine can be sold for $175 million at the end of the project. The tax rate is 20% and the required rate of return is 7%. Find the NPV using straight-line depreciation.Anta networks want to modernize their networking system. Proposals have been received from two major software companies. The first proposal cost OMR9million but will raise the firm’s annual cash flows by OMR5million. The second proposal cost OMR8million and provides cash flow of OMR5.5million a year. Both projects have a life span of 4 years. Assuming that the cost of capital is 9%, which proposal may be recommended on the basis of Net Present Value criteria.
- Deep Drill Inc. is evaluating a project to produce a high-tech deep-sea oil exploration device. The investment required is $80 million for a plant with a capacity of 15,000 units a year for 5 years. The device will be sold for a price of $12,000 per unit. Sales are expected to be 12,000 units per year. The variable cost is $7,000 and fixed costs, excluding depreciation, are $25 million per year. Assume Deep Drill employs straight-line depreciation on all depreciable assets, and assume that they are taxed at a rate of 36%. If the required rate of return is 12%, what is the approximate NPV of the project?Sandrine Machinery is a Swiss multinational manufacturingcompany. Currently, Sandrine’s financial planners are considering undertaking a 1-yearproject in the United States. The project’s expected dollar-denominated cash flows consistof an initial investment of $2,000 and a cash inflow the following year of $2,400. Sandrineestimates that its risk-adjusted cost of capital is 10%. Currently, 1 U.S. dollar will buy0.96 Swiss franc. In addition, 1-year risk-free securities in the United States are yielding3%, while similar securities in Switzerland are yielding 1.50%.a. If this project was instead undertaken by a similar U.S.-based company with the samerisk-adjusted cost of capital, what would be the net present value and rate of returngenerated by this project?b. What is the expected forward exchange rate 1 year from now?c. If Sandrine undertakes the project, what is the net present value and rate of return ofthe project for Sandrine?Green & Company is considering investing in a robotics manufacturing line. Installation of the line will cost an estimated $15.7 million. This amount must be paid immediately even though construction will take three years to complete (years 0, 1, and 2). Year 3 will be spent testing the production line and, hence, it will not yield any positive cash flows. If the operation is very successful, the company can expect after-tax cash savings of $10.7 million per year in each of years 4 through 7. After reviewing the use of these systems with the management of other companies, Green's controller has concluded that the operation will most probably result in annual savings of $7.9 million per year for each of years 4 through 7. However, it is entirely possible that the savings could be as low as $3.7 million per year for each of years 4 through 7. The company uses a 12 percent discount rate. Use Exhibit A.8. Required: Compute the NPV under the three scenarios. Note: Round PV factor to 3…
- Micheal’s Machinery is a German multinational manufacturing company. Currently, Micheal’s financial planners are considering undertaking a 1-year project in the United States. The project's expected dollar-denominated cash flows consist of an initial investment of $2000 and a cash inflow the following year of $2400. Micheal’s estimates that its risk-adjusted cost of capital is 12%. Currently, 1 U.S. dollar will buy 0.7 Germany. In addition, 1-year risk-free securities in the United States are yielding 6.5%, while similar securities in Germany’s are yielding 4.5%. If this project was instead undertaken by a similar U.S.-based company with the same risk-adjusted cost of capital, what would be the net present value and rate of return generated by this project? Round your answers to two decimal places. What is the expected forward exchange rate 1 year from now? Round your answer to two decimal places. If Micheal undertakes the project, what is the net present value and rate of return of…Sunland Corporation is considering investing in a new facility. The estimated cost of the facility is $2,336,000. It will be used for 12 years, then sold for $740,000. The facility will generate annual cash inflows of $398,000 and will need new annual cash outflows of $127,000. The company has a required rate of return of 7%. Calculate the internal rate of return on this project, and discuss whether the project should be accepted. (Round answer to O decimal places, e.g. 13%) Internal rate of return The project should be %All American Telephones Inc. is considering the productionof a new cell phone. The project will require an investment of $13 million. If the phone iswell received, the project will produce cash flows of $8 million a year for 3 years, but ifthe market does not like the product, the cash flows will be only $2 million per year. Thereis a 50% probability of both good and bad market conditions. All American can delay theproject a year while it conducts a test to determine whether demand will be strong or weak.The delay will not affect the dollar amounts involved for the project’s investment or its cashflows—only their timing. Because of the anticipated shifts in technology, the 1-year delaymeans that cash flows will continue only 2 years after the initial investment is made. AllAmerican’s WACC is 8%. What action do you recommend?