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Another utilization of cash flow analysis is setting the bid price on a project. To calculate the bid price, we set the project NPV equal to zero and find the required price. Thus the bid price represents a financial break-even level for the project. Guthrie Enterprises needs someone to supply it with 142,000 cartons of machine screws per year to support its manufacturing needs over the next five years, and you’ve decided to bid on the contract. It will cost you $1,820,000 to install the equipment necessary to start production; you’ll depreciate this cost straight-line to zero over the project’s life. You estimate that in five years this equipment can be salvaged for $152,000. Your fixed production costs will be $267,000 per year, and your variable production costs should be $8.70 per carton. You also need an initial investment in net working capital of $132,000. If your tax rate is 35 percent and you require a return of 12 percent on your investment, what bid price per carton should you submit?
ABC Co. presently does not pay a dividend, but is expected to pay a dividend in year 3 of $.75 and the dividend then will increase at a constant rate of 5% annually. The rate of return is 10%. What is an estimate of the price of the stock today?
Calculate budgeted labor cost for an engine design which Pohlman has built before
Abbott Laboratories (ABT) engages in the discovery, development, manufacture, and sale of a line of health care and pharmaceutical products. Below you will find selected information from Value Line. Use the Value Line estimated 2009 figures as the ac..
the work to understand how to get the MIRR with unconventional cash flows. the firm’s cost of capital is 9%, what is the project’s MIRR?
What type of trading arrangement would an independent United Kingdom have with the EU
Calculate the present value of an annuity-due of $500 over 10 years. compute the future value of the annuity in (a) at the end of year 10.
How sensitive is OCF to an increase of one unit in the quantity sold?
Find the 3-year implied forward rate one year and two years from now (the expected 3-year spot rate starting one year from now and two years from now). State the final answers as an annual rate.
What rate of interest was used in the present value computation? Assume interest is compounded annually.
An investor purchases a mutual fund share for $100. What is the net rate of return from this investment?
Karen just purchased a stock costing $33 on margin, paying $23 and borrowing the remainder from a brokerage firm at 15 percent annual interest. The stock pays an annual dividend of $2. If Karen sells the stock after one year at a price of $50, what i..
You find the following corporate bond quotes. To calculate the number of years until maturity, assume that it is currently January 15, 2016.
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