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A 10-year widget-producing project requires $36 million in upfront investment (all in depreciable assets), 30% of which is borrowed capital at an interest rate of 6% per year. The expected widget sales are 1,000,000 widgets per year. The expected price per widget is $24 and the variable cost is $12 per widget. The fixed costs excluding depreciation are expected to be $6 million per year for ten years. The upfront investment will be depreciated on a straight line basis for the 10-year useful life of the project to zero book value. The expected salvage value of the assets is $8 million. The tax rate is 40% and the WACC applicable to the project is 15%.
Calculate the accounting Break-even point.
Preparation of a report giving advice to a client on the introduction of a new system of internal controls.
An investment provides the following (annual) returns (cash inflows): What is the discounted payback period if the initial investment is $2800?
If one of your jobs was to manage transaction exposures, what factors would influence your decision?
A single sum that will grow to $492,850 will be deposited on January 1 of this year. Agreed to pay a severance package to a discharged employee.
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What is the discounted payback period for the investment project that has the following cash flows, if the discount rate is 14 percent?
The security has no special covenants. Calculate the security’s equilibrium rate of return.
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The payoff is based on the exact number of days and a 360-day year. If you have a financial calculator or a spreadsheet with an IRR function, solve for the internal rate of return and annualize it to determine the effective cost of borrowing.
What percentage of the equity did the two founders each own? How much was it worth? What was the company’s enterprise value, assuming no excess cash?
Consider a 8.4 percent coupon bond with eleven years to maturity and a current price of $1,041.40. Suppose the yield on the bond suddenly increases by 2 percent. a. Use duration to estimate the new price of the bond b. Calculate the new bond price
You recently purchased a stock that is expected to earn 18 percent in a booming economy, 13 percent in a normal economy, and lose 4 percent in a recessionary economy. There is a 21 percent probability of a boom, a 68 percent chance of a normal econom..
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