finnacial mathematics

osmiletko · 2012-08-17 05:08:25

Hallo all,
i try to studyed finnacial mathematics in english, but it is foreign language for me, so i have big problem to understand english terminology. Is there anybody who is able to help mi with solve this 10 questions ?

if there is someone but he cant solve it in this forum, please write me and we can use Facebook or Skype or E-mail.
thanks all

Question 1
( The project with the highest IRR is always the project with the highest NPV.
True
False - i think this is right because it is not necessery to by highest
Question 2

The city of Middleville is considering offering public bus service. Setting up the service will cost the city $1.2M (where M stands for million). The useful life of the buses is 25 years. Annual maintenance of the buses would cost $100,000 per year and they would need a major overhaul in year 15 that will cost a total of $700,000. This overhaul is in addition to the annual maintenance. Annual labor and administrative costs will begin at $180,000 in year 1 and grow at 2% per year thereafter. The buses will generate a revenue of $150,000 in year 1 and it will grow at 4% per year thereafter. Reduced parking requirements and other benefits generated by the project will save the city $200,000/year. The salvage value (price the city can get in the future after maintenance) of the used buses in year 25 is expected to be $300,000. What is the NPV of the bus proposal? The city does not pay taxes and the discount rate is 5%.(Again, all cash flows except initial investments happen at the end of the year.) (You are strongly encouraged to use a spreadsheet.)
-82207
59693
1381432
257413
Question 3

Alpha Inc. has the following two projects that it is considering, and it wants to choose one. Project A has an investment outlay/expense today of $1,000, and its cash flows over the next three years are $500, $600, $700. Project B has an outlay of $2,000, and cash flows of $1,000, $1,200, and $1,400. Which project should Alpha choose? (You can assume no taxes.)
Project A
Project B
Does not matter; both are essentially the same
Cannot make a choice based on information

Question 4
GE has the following two projects that it is considering; it can choose only one. Project A has an investment outlay/expense today of $10M, and its cash flows over the next three years are $4M, $4M, $5M. Project B has an outlay of $10M, and cash flows of 0, 0, and $14M. Which project should GE choose if the cost of capital for similar projects is 5%?
Project A
Project B
Do not have enough information
Should not choose either.

Question 5
All else equal, firms that provide more financing to their customers will in turn have higher net working capital.
True.
False
Question 6

Last year your firm had revenue of $36 million, cost of goods sold (COGS) of $32 million, Selling, General, & Administration costs (SG&A) of $3 million, Account Receivables (AR) of $6 million, Account Payables (AP) of $4 million and Inventory of $4 million. What will be the free cash flow next/this year if you boost revenue 8%, while holding COGS growth to 3%, and increasing AP 30%, while everything else remains same as last year? (Assume no taxes and no additional capital expenditures.) (You are encouraged to use a spreadsheet even for this specific type of question.)
4120000
5170000
6220000
7310000

Question 7

Rain in Spain (RiS) is a manufacturer of high quality raincoats. Currently, the retail price of each raincoat is $70 and is produced at a cost of $45. This past year, they sold 50,000 raincoats and they expect this number to grow each year by 6% each year for the next 10 years. The operations team at RiS recently brought to your attention a new technology that could lower the cost of production. This technology requires an upfront fixed investment of $2,000,000 and has the capacity to produce up to 90,000 raincoats per year at a 12% lower cost per unit. There is no increased working capital need due to this new technology, and no value of the machine/technology after 10 years. What is the NPV of investing in the new technology? Ignore taxes and assume a discount rate of 14%. (Hint: Think incrementally; the difference between the world without and with this new technology! Also, ignoring taxes will be a big help if you think right.) (Enter just the number without the $ sign or a comma; round off decimals.)(You are strongly encouraged to use a spreadsheet.)
Answer for Question 7

Question 8
Fresh off the excitement of the 2012 London Olympic Games, you decide that you want your firm to take advantage of the profits to be made for the 2016 games in Rio de Jeneiro. To do so you plan to open a factory in Brazil. After examining the idea, your CFO projects revenues next year (2013) to be $15 million and costs to be $9 million. Both of these are expected to grow at a rate of 25% per year as the excitement for the games builds. Your firms faces a 35% tax rate, a 14% discount rate and you can depreciate your new investment using the straight line method over the four years leading up to the games, at which point the value of the venture moving forward will be $5 million. (This $5 million is the terminal value that is in year 4 (that is, 2016) dollars and is the PV of all cash flows year 5 and beyond.) The capital expenditure of this project is $12M. What is the NPV of the project? Assume that you have no significant working capital costs.(Enter just the number without the $ sign or a comma; round off decimals.) (You are strongly encouraged to use a spreadsheet.)
Answer for Question 8

Question 9
Starbuck's is considering opening another store in Chicago. A store is expected to have a long economic life, but the valuation horizon is 7 years. The store in Chicago is expected to create revenues of $3M in the first year and they are likely to grow at 2% per year thereafter. The cost of goods sold are $1.2M in year 1 and they are also expected to grow at 2% per year thereafter. Selling and administration costs are likely to be $0.5M in the first year and then grow at 5%. The tax rate is 35%. Starbucks is so good at managing its stores that working capital increases can be assumed to be negligible. But Starbucks will have to invest $3.5M in purchasing a store (with land). The good news is that this outlay can be depreciated straight line over 7 years. Also, Starbucks has estimated that the terminal value in year 7 dollars will be $10M. This value is the value of all cash flows in year 8 and beyond. What is the NPV of opening this new store if the appropriate discount rate is 7.75%?(Again, all cash flows except initial investments happen at the end of the year. Enter just the number without the $ sign or a comma; round off decimals.)(You are strongly encouraged to use a spreadsheet.)
Answer for Question 9

Question 10
Big Blue Granite (BBG) needs to purchase a new saw for creating their top quality countertops. Saw A costs $250,000 with $4,000 of annual maintenance costs for the first year that will increase by 5% each year for the 7-year life of the saw. Saw B costs $150,000 with $10,000 of annual maintenance costs for the first year that will increase by 15% each year for the 4-year life of the saw. Which saw should BBG choose? What is the annualized cost of this choice? Assume a discount rate of 12%, and ignore all taxes.
(A, 40367)
(B, 49983)
(B, 46794)
(B, 61624)
(A, 38682)
(A, 59331)

Bob · 2012-08-17 05:37:15

hi osmiletko

http://www.mathisfunforum.com/viewtopic.php?id=14654

Bob

bobbym · 2012-08-17 05:38:57

Hi osmiletko;

It looks like you are trying to get through an entire business course. Someone would be more inclined if you would have at least shown your work on each problem.

The stuff you posted is greek to me too. To get help you have to provide it.

Your question #2 is a very detailed and difficult problem. It could be a linear optimization type, I do not know. Someone would help with small particulars of it but you just want to become a senior VP of finance on someone else's work. Someday you may be called upon to answer this question in reality. What will you do?

This is a math forum. People here are good at math. If you post your problems in terms of a math problem you will get help. You must work on these problems yourself, very hard. Asking for help only when you need it.

I do not think there is anything wrong with your english.

osmiletko · 2012-08-17 05:53:58

nonono you dont understand me, i can, i hope that i can solve this exercises but not in english this is a big problem for my. My question is, if there is someone who is able to solve this question WITH ME. someone who tell me what does some term means with another words for example. Someone who is able to by my "tutor" for this 10 questions

bobbym · 2012-08-17 06:06:26

Hi;

You have this underneath #2:

-82207
59693
1381432
257413

Perhaps if you have the equations that generate whatever that is, I could look at that.

mzam10 · 2012-08-17 06:30:21

I am the new user of math is fun forum.
plz help, how can i proceed?

Bob · 2012-08-17 06:36:15

hi mzam10,

Welcome to the forum!

There are sections for puzzles, mathematical ideas and a "help me" section.

If help is what you want, start a new topic thread and ask your question.

Bob

osmiletko · 2012-08-17 06:58:51

bobbym wrote:

Hi;
You have this underneath #2:
-82207
59693
1381432
257413
Perhaps if you have the equations that generate whatever that is, I could look at that.

what ?? i dont understand. "Perhaps if you have the equations that generate whatever that is, I could look at that" ?? i know what this world mean but i dont know what you can say . do you want to see "my work". the paper where i count ? but i dont use equations ( for example x+5=3 )to solve this problem....if you can help me, but not on forum where everybody can see the result, i can swap to another type of connection with you

bobbym · 2012-08-17 07:11:28

Hi;

I have no problem about everybody seeing the result. Everyone knows me everywhere, I am more popular than Howard Stern and much better looking although his grasp of algebraic topology is better than mine.

The day will come when the bobbym's will overrun the internet. Until that wondrous day occurs I suggest you post right here.

Those numbers came from somewhere, you used a spreadsheet, so...

For instance for #10, it looks to me like BBG should get saw A. I used a formula but what about this 12% discount jazz? What does that mean?

Math Is Fun Forum

#1 2012-08-17 05:08:25

finnacial mathematics

#2 2012-08-17 05:37:15

Re: finnacial mathematics

#3 2012-08-17 05:38:57

Re: finnacial mathematics

#4 2012-08-17 05:53:58

Re: finnacial mathematics

#5 2012-08-17 06:06:26

Re: finnacial mathematics

#6 2012-08-17 06:30:21

Re: finnacial mathematics

#7 2012-08-17 06:36:15

Re: finnacial mathematics

#8 2012-08-17 06:58:51

Re: finnacial mathematics

#9 2012-08-17 07:11:28

Re: finnacial mathematics

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