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?(Calculating free cash flows?) You are considering new elliptical trainers and you feel you can sell 5,000 of these per year for 5 years? (after which time this project is expected to shut down when it is learned that being fit is? unhealthy). The elliptical trainers would sell for ?$1,800 each and have a variable cost of ?$900 each. The annual fixed costs associated with production would be ?$1,500,000. In? addition, there would be a ?$4,000,000 initial expenditure associated with the purchase of new production equipment. It is assumed that this initial expenditure will be depreciated using the simplified? straight-line method down to zero over 5 years. This project will also require a? one-time initial investment of ?$1,400,000 in net working capital associated with? inventory, and that working capital investment will be recovered when the project is shut down.? Finally, assume that the? firm's marginal tax rate is 31 percent. a. What is the initial outlay associated with this? project? b. What are the annual free cash flows associated with this project for years 1 through? 4? c. What is the terminal cash flow in year 5 ?(that is, what is the free cash flow in year 5 plus any additional cash flows associated with the termination of the? project)? d. What is the ?project's NPV given a required rate of return of 11 ?percent?
Discuss what could happen if management does not fulfill responsibilities related to finance. Describe why cash flow is more important than sales in a business.
Explain the theory of Comparative Advantage, and its implication for production and trade. Are there some countries that have no comparative advantage? What happens if two countries have exactly the same skill, technology, and labor costs? How could ..
You buy 100 shares in Bondex Corporation for $ 25 a share. Each share pays $ 1 in dividends every three months. You have a five year holding period and expect to invest all dividends received in the first two years at 6 percent, and all dividends rec..
The recent Great Recession of 2008-2009 has had significant impact on a wide range of corporate performance.
Consider a firm with a debt-equity ratio of 0.40. The required rate of return on this firm’s unlevered equity is 18% and the pre-tax cost of debt is 8%. Sales, which totalled $34 million last year, are projected to remain at that level for the forese..
Flotation costs on new common stock total 10 percent, and the firm's marginal tax rate is 40 percent. What is Rollins' retained earnings break point?
What is a measure of the sensitivity of a stock or portfolio to market risk?
Stock A's stock has a beta of 1.30, and its required return is 12.00%. Stock B's beta is 0.80. If the risk-free rate is 3.50%, what is the required rate of return on B's stock?
The injection molding department of a company uses 40 pounds of a powder a day. Inventory is reordered when the amount on hand is 240 pounds. Lead time averages five days. Lead time is normally distributed and has a standard deviation of two days. If..
Calculate the capacity payment, in $ per MW per day, needed for the plant to recover all of its capital and operational costs.
If the market return is expected to be 13.50 percent and the risk-free rate is 6.70 percent, what is Paycheck’s risk premium?
A firm's overall cost of equity is:
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