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Pappy’s Potato has come up with a new product, the Potato Pet (they are freeze-dried to last longer). Pappy’s paid $130,000 for a marketing survey to determine the viability of the product. It is felt that Potato Pet will generate sales of $585,000 per year. The fixed costs associated with this will be $189,000 per year, and variable costs will amount to 20 percent of sales. The equipment necessary for production of the Potato Pet will cost $640,000 and will be depreciated in a straight-line manner for the four years of the product life (as with all fads, it is felt the sales will end quickly). This is the only initial cost for the production. Pappy’s is in a 34 percent tax bracket and has a required return of 15 percent. Required: Calculate the Time 0 cash flow for this project. (Do not round intermediate calculations. Enter a negative sign when necessary. Round your answer to the nearest whole number (e.g., 32).) Time 0 cash flow $ Calculate the annual OCF for this project. (Do not round intermediate calculations. Round your answer to the nearest whole number (e.g., 32).) OCF $ Calculate the payback period for this project. (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) Payback period years Calculate the NPV for this project. (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) NPV $ Calculate the IRR for this project. (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).) IRR %
Lee Ann, Inc., has declared a $6.60 per-share dividend. Suppose capital gains are not taxed, but dividends are taxed at 20 percent. New IRS regulations require that taxes be withheld when the dividend is paid. Lee Ann sells for $94.60 per share, and ..
What was the intrinsic value of an option? What was the option’s time premium?
You purchased a zero coupon bond one year ago for $171.56. The market interest rate is now 9 percent. If the bond had 20 years to maturity when you originally purchased it, what was your total return for the past year? Assume semiannual compounding.
You read in The Wall Street Journal that 30-day T-bills are currently yielding 4.5%. Your brother-in-law, a broker at Safe and Sound Securities, has given you the following estimates of current interest rate premiums: On the basis of these data, what..
Do negative values of free cash flow in any way alter or invalidate the notion that a company’s fair market value equals.
You have accumulated some money for your retirement. You are going to withdraw $74286 every year at the beginning of the year for the next 24 years starting from today. How much money have you accumulated for your retirement? Your account pays you 10..
The common stock and debt of Northern Sludge are valued at $70 million and $30 million, respectively. Investors currently require a return of 16.0% on the common stock and 7.7% on the debt. If Northern Sludge issues an additional $13 million of commo..
It is now January 1. You plan to make a total of 5 deposits of $600 each, one every 6 months, with the first payment being made today. The bank pays a nominal interest rate of 10% but uses semi annual compounding.
The Shell Corporation has a 34% tax rate and owns a piece of petroleum-drilling equipment that costs $138,600 and will be depreciated at a CCA rate of 30%. Calculate the overall present worth of these cash flows with tax effects if market interest r..
The incorporation of triple bottom line principles in work planning is a move many organisations have made. Explain the concept of triple bottom line principles.
PRBA007 - Discuss why you are bothered by these trends and offer one or more explanations that may underlie what is actually going on within Flexcom and Despite sluggish sales volume, the company's net income has steadily increased for each of the l..
Sam promises to pay Sandy $2,500 in four years and another $3,200 four years later for a loan of $2,500 from Sandy today. What is the monthly interest rate that Sandy is getting? Assume interest is compounded monthly.
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