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We are evaluating a project that costs $848,000, has an eight-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 62,000 units per year. Price per unit is $40, variable cost per unit is $20, and fixed costs are $625,000 per year. The tax rate is 35 percent, and we require a 20 percent return on this project.
-Calculate the base-case cash flow and NPV-What is the sensitivity of NPV to changes in the sales figure?-What is the sensitivity of OCF to changes in the variable cost figure?
Crypton Electronics has a capital structure consisting of 45% common stock and 55% debt. A debt issue of $1,000 par value, 6.2% bonds that mature in 15 years and pay annual interest will sell for $978.
Recently, it developed a new process for producing spices. The process requires new machinery that would cost $2,228,876. have a life of five years, and would produce the cash flows shown in the following table.
A payment of $10 at time 1 and a payment of $20 at time 4 is equivalent to a payment of $30 at time t assuming a constant force of interest delta = .05.
Bui Corp. pays a constant $12 dividend on its stock. The company will maintain this dividend for the next nine years and will then cease paying dividends forever.
Miiler Manufacturing has 4 million shares of commonstock outstanding. The currentshare price is $76, and the book value per share is $5. Filer Manufacturing also has two bond issues outstanding.
Blue Water Systems is analyzing a project with the following cash flows. Should this project be accepted based on the discounting approach to the modified internal rate of return if the discount rate is 14 percent
Your first assignment is to determine if the fund you are managing should invest $25 million dollars in the stock of the company you have selected for your first analysis/investment decision.
Alex Karev has taken out a $180,000 loan with an annual rate of 8 percent compounded monthly to pay off hospital bills from his wife Izzy's illness. If the most Alex can afford to pay is $3,500 per month,
Accounts receivable as collateral, cost of borrowing Maximum Bank has analyzed the accounts receivable of Scientific Software, Inc. The bank has chosen eight accounts totaling $134,000 that it will accept as collateral.
Highsmith Rental Company purchased an apartment building early in 2013. There are 20 apartments in the building and each is furnished with major kitchen appliances.
That Wich Corp. had additions to retained earnings for the year just ended of $328,000. The firm paid out $176,000 in cash dividends, and it has ending total equity of $4.81 million.
Calculate the arithmetic average returns for large-company stocks and T-bills over this period. Calculate the observed risk premium in each year for the large-company stocks versus the T-bills.
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