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1.Using the assumptions in part a of Problem 5 (assuming there is no cannibalization),
a. Calculate HomeNet’s net working capital requirements (that is, reproduce Table 7.4 under the assumptions in Problem 5(a)).
b. Calculate HomeNet’s FCF (that is, reproduce Table 7.3 under the same assumptions as in (a)).
2.A bicycle manufacturer currently produces 300,000 units a year and expects output levels to remain steady in the future. It buys chains from an outside supplier at a price of $2 a chain. The plant manager believes that it would be cheaper to make these chains rather than buy them. Direct in-house production costs are estimated to be only $1.50 per chain. The necessary machinery would cost $250,000 and would be obsolete after 10 years. This investment could be depreciated to zero for tax purposes using a 10-year straight-line depreciation schedule. The plant manager estimates that the operation would require additional working capital of $50,000 but argues that this sum can be ignored since it is recoverable at the end of the 10 years. Expected proceeds from scrapping the machinery after 10 years are $20,000.
If the company pays tax at a rate of 35% and the opportunity cost of capital is 15%, what is the net present value of the decision to produce the chains in-house instead of purchasing them from the supplier?
Explain Effect of risk free rate on cost of equity and debt and Assume that the risk-free rate increases
a company that fabricates heat exchangers which shall be called abc for the purposes of not exposing it to an
W.C. Cycling had$55,000 in cash at year-end 2007 and $25,000 in cash at year-end2008. Cash flow from long-term investing activities totaled-$25,000, and cash flow from financing activities totaled+$170,000.
Describe the each project's payback period and Describe the each project's net present value
If John suppose his investments would earn 8% annually, and his life expectancy is 80 years, must he invest in his own plan or must he make contributions to his employer's fund?
Your portfolio has provided you with returns of 8.6 percent, 14.2 percent, -3.7 percent, and 12.0 percent over the past four years, respectively. What are the arithmetic average return and the geometric average return for this period?
Which of the following best describes a floating-rate bond?
A firm has a capital structure with $30 million in equity and $90 million of debt. The cost of equity capital is 10% and the pretax cost of debt is 6%. If the marginal tax rate of the firm id 40%, compute the weighted average cost of capital of th..
Use the CF function and solve for NPV to get the answer. Just enter the number up to 2 decimal points. Do not enter $ in the answer box.
The marginal benefit of a product A is p=-q+100. The marginal cost is defined by the expression p=1.5q. Find the equilibrium price, equilibrium quantity, the expected revenue under these assumptions, and consumer surplus.
after reading your report as well as comments by others on the teams the genesis team began to understand the
A new Grady White fishing boat cost $5000 in 1979. Today, the very same boat costs around $40,000. Estimate the average annual inflation rate, using the Rule of 72.
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