Cash before delivery for its raw materials

Assignment Help Financial Management

Reference no: EM131299989

J. Walker Manufacturing Co. is financially distressed and must pay “cash before delivery” for its raw materials. It pays $40 per assembly at the time of order. The parts are received 30 days after the order. Five days after they are received they are taken out of inventory and used in the manufacturing process. Walker incurs additional processing costs of $6.5 per assembly at the point in time when it manufactures its finished products. On average, it sells each finished assembly 95 days after manufacturing takes place.

b. Figure out how much Walker must sell each assembly for to break even on the present value basis. Use a discount rate of 15 percent.

c. Now assume that Walker decides to sell the finished goods for $48.50. How high could the discount rate be for Walker to still break even on a present value basis? You may use the “Goal Seek” command in the Tools menu in Microsoft Excel.

Reference no: EM131299989

Questions Cloud

What is the npv of the project and should you pursue project : A business opportunity has presented itself to you and one of your classmates. Your opportunity is to enter the fast growing craft beer industry. Your projected sales in the first year is 7500 kegs. The tax rate is 34 percent and the required return ..

Should the preferred stock include a call provision : In the summer of 2015, the Hadaway Company was planing to finance an expansion with a convertible security. It considered a convertible debenture but feared the burden of fixed interest charges if the common stock price did not rise enough to make co..

What is the component cost of these bonds with warrants : Srorm Software wants to issue $120 million ($1,200 x 100,000 bonds) in new capital to fund new opportunities. If Storm raised the $120 million of new capital in a straight-debt 20-year bond offering, Storm would have to offer an annual coupon rate of..

Calculate what the stock should sell for five years from now : The Matador Restoration Co. is facing continually decreasing revenues due to the ever-shrinking population of people who want to restore vintage AMC Matadors. At what price should the stock sell for today? Calculate what the stock should sell for 5 ..

Cash before delivery for its raw materials : J. Walker Manufacturing Co. is financially distressed and must pay “cash before delivery” for its raw materials. It pays $40 per assembly at the time of order. Figure out how much Walker must sell each assembly for to break even on the present value ..

What is the amount of dilution in earnings per share : A 20-year bond pays 6% on a face value of $1,000. If similar bonds are currently yielding 5%, what is the market value of the bond? Use annual analysis. Maxwell Corp. is coming to the market with a new offering of 450,000 shares of stock at $22 to th..

What would be the percentage change in the price of bond : Both Bond Sam and Bond Dave have 6 percent coupons, make semiannual payments, and are priced at par value. Bond Sam has three years to maturity, whereas Bond Dave has 20 years to maturity. If interest rates suddenly rise by 2 percent, what is the per..

To supplement your planned retirement : To supplement your planned retirement in exactly 45 years, you estimate that you need to accumulate $ 220,000 by the end of 45 years from today. You plan to make? equal, annual,? end-of-year deposits into an account paying 8% annual interest. The an..

What is the approximate market value of the bond : A ten-year bond pays 7% interest on a $1000 face value annually. If it currently sells for $1,195, what is its approximate yield to maturity? A 15-year zero-coupon bond was issued with a $1000 par value to yield 8%. What is the approximate market val..

User Account

All Pages