Question1. Archer Daniels Midland Company is considering purchasing a new farm that it plans to operate for ten years. The farm will need an initial investment of $12.10 million. This investment will comprise $2.10 million for land and $10.00 million for trucks and other equipment. The land, all trucks, and all other equipment are expected to be sold at the end of 10 years at a price of $5.20 million, $2.26 million above book value. The farm is anticipated to produce revenue of $2.02 million per year, and annual cash flow from operations equals $1.84 million. The marginal tax rate is 35 percent, and appropriate discount rate is 10 percent. Evaluate the NPV of this investment.
Question2. Assume company having a variable overhead for the month of January is 40000 dollar and 36000 dollar as a budgeted as well as actual and output is to be in units which is 20000 and 16000 as budgeted as well as actual respectively. And the working hours are to be 4000 and 3280 as budgeted and actual. Here the motto is to be determining the variable overheard variance of company.
Question3. Suppose that the risk-free rate is 3% and the expected return on market is 11%. What is the required rate of return on a stock with the beta of 2?
Question4. Suppose that the risk-free rate is 6% and the market risk premium is 6%.
a. What is the expected return for the entire stock market?
b. What is the required rate of return on a stock with the beta of 2.1?