Alpha Geek

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Category > Accounting Posted 27 May 2017 My Price 5.00

You run a construction firm. You just won a contract to build a goverment office building

 

1) You run a construction firm. You just won a contract to build a governent office building. Building it will require one year and require an investment of $11.43 million today and $5.00 million in one year. The government will pay you $24.00 million upon the building's completion. Suppose the cash flows and their times of payment are certain, and the risk-free interest rate is 8%. What is the NVP of this opportunity?

2) Your computer manufacturing firm must purchase 11,000 keyboards from a supplier. One supplier demands payment of $121,000 today plus $11 per keyboard payable in one year. Another supplier will charge $23 per keyboard, also payable in one year. The risk free is 7%.

a) What is the difference in terms of dollars today? Which offer should your firm take?

b) Suppose your firm does not want to spend cash today. How can it take the first offer and not spend $121,000 of its own cash today?

 
 

Answers

Alpha Geek
(8)
Status NEW Posted 27 May 2017 02:05 PM My Price 5.00

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file 1495894423-Answer.docx preview (175 words )
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