You have a chance to participate in a project that produces…

You have a chance to participate in a project that produces the following cash flows: ___C0__________C1__________C2___ -$10,000       -10,000      +$25,000 The internal rate of return is 15.83% per year. If the opportunity cost of capital is 10.00% per year, would you accept the offer?

The Wall Street Journal reported that the winner of a Massac…

The Wall Street Journal reported that the winner of a Massachusetts State Lottery prize had the misfortune to be both bankrupt and in prison for fraud. The prize was $9,420,713 to be paid in equal installments of $495,827 at the end of each of the next 19 years. (There were 20 installments, but the winner had already received the first payment.) The bankruptcy court judge ruled that the prize should be sold off to the highest bidder and the proceeds used to pay off creditors. If the appropriate discount rate for a bidder was 8.00% per year, how much should the bidder have been prepared to pay for the remaining 19 annual payments of $495,827?

The pecking order theory of capital structure predicts that…

The pecking order theory of capital structure predicts that firms will fund positive NPV projects first with internally generated funds, then with debt, and finally with new equity. What is the primary insight of the pecking order story theory that leads to this funding ordering in which equity is only issued as a last resort?

When students’ attempts have red flags in Honorlock reports,…

When students’ attempts have red flags in Honorlock reports, I check the videos to see if there is a serious violation of the academic honesty policy. Below, you see an attempt that has one red flag, a warning to the professor to check what Honor-etiquette violation took place. The student got a warning message, and when the student read it, she realized what had happened and apologized. This video is an example of an Honorlock report I receive for each student’s attempt. On the left-hand side, you see the video of the student, and on the right-hand side, you see the report that I received. I use my mouse to scroll to check for red flags. Do you know why this attempt got flagged? There might be more than one answer. 

Continuing with the same project analysis, Blue Star has now…

Continuing with the same project analysis, Blue Star has now asked for your help in computing the IRR of the project. Recall that Blue Star’s estimated cost of capital, appropriate for this project, is 9.00% per year and the project’s free cash flows are estimated as follows:   Blue Star Airlines Free Cash Flow ($ Millions)   Year 0 Year 1 Year 2 Year 3 Free Cash Flow ($20.00) $6.75 $8.50 $12.50    Compute the IRR to the nearest hundredth of a percent. For example, enter 7% as 7.00 or 6.625% as 6.63.