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This problem concerns the effect of taxes on the various break-even measures. Consider a project to supply Detroit with 25,000 tons of machine screws annually for automobile production. You will need an initial $2,000,000 investment in threading equipment to get the project started; the project will last for five years. The accounting department estimates that annual fixed costs will be $800,000 and that variable costs should be $300 per ton; accounting will depreciate the initial fixed asset investment straight-line to zero over the five-year project life. It also estimates a salvage value of $220,000 after dismantling costs. The marketing department estimates that the automakers will let the contract at a selling price of $360 per ton. The engineering department estimates you will need an initial net working capital investment of $200,000. You require a return of 10 percent and face a marginal tax rate of 38 percent on this project. Calculate the accounting, cash, and financial break-even quantities.
Cash break-even
Accounting break-even
Financial break-even
Patton Paints Corporation has a target capital structure of 45% debt and 55% common equity, with no preferred stock. What is cost of common equity and WACC.
Which of the following statements regarding a homeowner warranty is FALSE?
Pragya borrows $10,000 for a term of 10 years at an effective annual interest rate of 12%. At the end of each year she makes annual interest payments and accumulates the principal in two sinking funds. One third of her deposit is made to a sinking fu..
Mr. W. Rooney borrowed $15,000 at a rate of 8.5% and must repay it in 5 equal installments at the end of each of the next 5 years. How much would Mr. W. Rooney still owe at the end of the first year, after he has made the first payment?
Erin invests $3750 spread across three funds; Fund A, Fund B, and Fund C. Over the course of the following year, A(in dollars) was equal to %20 of the total return from all three funds fir the year. The amount invested in Fund B was equal to 1.2 time..
Consider a three-period (four-date) binomial model that has the following characteristics: • Current price for underlying stock S = $40, Exercise price X = $40 • In each period, the stock price goes up by 6% or down by 2% from what it was in the prev..
A credit card company uses the average daily balance method to calculate its finance charges. Find the finance charge for the month of August? (31 days) if the average daily balance for August is ?$621.03. The annual interest rate is? 18%. ?(Round to..
Assume you take out a car loan of $9,000 that calls for 36 monthly payments of $340 each. What is the APR of the loan?
Compare the bank's risk measures with those of peer banks. What are the implications of any significant differences?
Monsanto, producer of seeds and Bayer AG, a German pharmaceutical company are in the process of executing a merger. The article also stated, “Combining Monsanto’s prowess in engineering seeds with Bayer’s much broader pesticide portfolio will “intens..
On the following January 1, her fund balance is $6600. What is Gretchen's dollar-weighted rate of return?
Becky Fenton has 70/140/80 automobile insurance coverage. If two other people are awarded $115,000 each for injuries in an auto accident in which Becky was judged at fault, how much of this judgment would the insurance cover?
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