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We are evaluating a project that costs $924, 000, has a four-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 87, 600 units per year. Price per unit is $34.55, variable cost per un is $20.80, and fixed costs are $756, 000 per year. The tax rate is 35 percent, and we require a return of 13 percent on this project.
Suppose the projections given for price, quantity, variable costs, and fixed costs are all accurate to within plusminus 10 percent. Calculate the best-case and worst-case NPV figures. (A negative answer should be indicated by a minus sign. Enter your answers in dollars, not millions of dollars, e.g. 1, 234, 567. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
Merton Enterprises has bonds on the market making annual payments, with 14 years to maturity, and selling for $1,086. At this price, the bonds yield to maturity is 6.8 percent. What must be the coupon rate on Merton’s bonds? (Face Value =$1000)
Nolan Corp is trying to determine its weighted average cost of capital. Nolan's current capital structure is: 45% Debt 15% Preferred 40% Common Equity Common Equity. If the firm has $12 Million in retained earnings, at what level of capital investmen..
Springfield Nuclear Energy Inc. bonds are currently trading at $1,639.76. The bonds have a face value of $1,000, a coupon rate of 10.5% with coupons paid annually, and they mature in 10 years. What is the yield to maturity of the bonds?
Describe a business practice that would help a company manage each of the following financial risks: Liquidity risk; Credit risk.
A 10-year annuity pays $2,900 per month, and payments are made at the end of each month. The interest rate is 8 percent compounded monthly for the first six years, and 6 percent compounded monthly thereafter. What is the present value of the annuity?
Eastern Markets has no debt outstanding and a total market value of $154,000. What is the breakeven EBIT?
Francis purchased a stock one year ago for $20, and it is now worth $24. The stock paid a dividend of $3 during the year. What was the stock's rate of return from capital appreciation during the year?
Designs Now is opening a showcase office to display and sell it’s computer designed poster art. what is the present value of the cash flows in year 0?
A Japanese company has a bond outstanding that sells for 96 percent of its ¥100,000 par value. The bond has a coupon rate of 6.3 percent paid annually and matures in 19 years. What is the yield to maturity of this bond?
You have been managing a $5 million portfolio that has a beta of 0.75 and a required rate of return of 14%. The current risk-free rate is 5.25%. Assume that you receive another $500,000. If you invest the money in a stock with a beta of 0.70, what wi..
A five-year project has an initial fixed asset investment of $350,000, an initial NWC investment of $38,000, and an annual OCF of −$37,000. The fixed asset is fully depreciated over the life of the project and has no salvage value. If the required re..
A local company sells many varieties of shoes. For one particular line, the company buys the shoes for $15.00 and sells them for $30.00. If shoes are out of stock, the goodwill cost is estimated to be $5.00 per pair, and the sale is lost. Find the op..
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