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We are evaluating a project that costs $1,080,000, has a ten-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 52,000 units per year. Price per unit is $50, variable cost per unit is $30, and fixed costs are $730,000 per year. The tax rate is 35 percent, and we require a return of 15 percent on this project. Suppose the projections given for price, quantity, variable costs, and fixed costs are all accurate to within ±10 percent.
Calculate the best-case and worst-case NPV figures. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations and round your final answers to 2 decimal places
What is the best-case? (in dollars)
What is the worst case? (in dollars)
Dillon Labs has asked its financial manager to measure the cost of each specific type of capital as well as the weighted average cost of capital. The weighted average cost is to be measured by using the following weights: 40% long-term debt, 10% pref..
Suppose we observe the following rates; The one year rate is 2.95%. The two-year rate is 3.36%. If the unbiased expectations theory holds, what is the one-year interest rate (in % format) expected in one year from now?
Project A has an internal rate of return of 15 percent. Project B has na IRR of 14 percent. Both projects have a required rate of 12 percent. Which of the following statements is most correct?
Which of the following is the last step when using the seven-step planner to determine the required current monthly savings that will meet a future retirement income objective? calculate retirement cash flow (shortfall or surplus). identify income fr..
Which one of the following will decrease the net present value of a project?
You expect that interest rates will fall sharply during the year and want to reduce your bank's risk position. The current yield curve is inverted with long- term rates below short- term rates that FSB loses in year two if rates either rise or fall s..
Hankins Corporation has 9.3 million shares of common stock outstanding, 680,000 shares of 7.3 percent preferred stock outstanding, and 193,000 of 8.5 percent semiannual bonds outstanding, par value $1,000 each. what rate should the firm use to discou..
Brushy Mountain Mining Company's coal reserves are being depleted, so its sales are falling. Also, environmental costs increase each year, so its costs are rising. As a result, the company's earnings and dividends are declining at the constant rate o..
The stock of Hammond corp. has a covariance with the market return of 0.031%. The variance of the market return is 0.041%. The estimated risk free rate is 4% and the estimated market rate of return is 10%. The estimated required return on Hammond's s..
Lunch Trucks, Inc. just paid a dividend of $2.00. Dividends are expected to grow at a rate of 3% per year from here on out. If the risk-free rate is 2%, the MRP is 8%, what is the most that you should be willing to pay for a share of this stock today..
A person deposits $10400 in an account which earns 7% compounded quarterly. At the end of 2 years the person withdraws $2600, and at the end of 5 years they withdraw $3640. How much can be withdrawn at the end of 7 years in order to deplete the accou..
The Black Bird Company plans an expansion. The expansion is to be financed by selling $52 million in new debt and $83 million in new common stock. The before-tax required rate of return on debt is 5.13% percent and the required rate of return on equi..
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