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A bicycle manufacturer currently produces 297,000 units a year and expects output levels to remain steady in the future. It buys chains from an outside supplier at a price of $ 2.10 a chain. The plant manager believes that it would be cheaper to make these chains rather than buy them. Direct in-house production costs are estimated to be only $1.50 per chain. The necessary machinery would cost $276,000 and would be obsolete after ten years. This investment could be depreciated to zero for tax purposes using a ten-year straight-line depreciation schedule. The plant manager estimates that the operation would require $23,000 of inventory and other working capital upfront (year 0), but argues that this sum can be ignored since it is recoverable at the end of the ten years. Expected proceeds from scrapping the machinery after ten years are $20,700 If the company pays tax at a rate of 35 % and the opportunity cost of capital is 15 % what is the net present value of the decision to produce the chains in-house instead of purchasing them from the supplier? Project the annual free cash flows (FCF) of buying the chains. The annual free cash flows for years 1 to 10 of buying the chains is $ (Round to the nearest dollar. Enter a free cash outflow as a negative number.)
The nominal rate of return is. The points on a CAL represent
Determine the profit from the arbitrage trade, and express it in terms of the profit from the spot and futures sides of the transaction. How does your answer relate to that in problem?
Suppose 20 years ago your mother deposited $ 2500 in an account earning 12% annually. Obtain today's value. Suppose 20 years ago your mother deposited $ 2500 in an account earning 12%. After 10 years she withdrew $ 1,000. Obtain today’s value. What i..
Calculate the Future Cash Outflow, Lump Sum Outflow (when college begins), and the Required Annual Savings for Anna Degala, 12 years of age.
Calculate the cost (inflated at 6%) for each year of college and find the total present value of those costs, discounted at 9%, as of the day she enters college
What is the expected duration of the project and assuming you will begin construction on October 1, 2016, what date do you expect to complete?
Flower Valley Company bonds have a 9.07 percent coupon rate. Interest is paid semiannually. The bonds have a par value of $1,000 and will mature 26 years from now. Compute the value of Flower Valley Company bonds if investors’ required rate of return..
Which is the amount that should be paid for a stock that will pay a dividend of $3.93 in one year and $2.62 in two years?
The Firm has an after- tax cost of capital of 12%, and its tax rate is 50%. Last year the firm had $800,000 of earnings before interest and taxes on its $12,000,000 of sales, while depreciation expense was $400,000. The firm had capital employed of $..
According to the liquidity premium hypotheses, what is the liquidity premium on the 8-year Treasury security, L8?
Your firm is considering an investment that will cost $920,000 today. the investment will produce cash flows of $450,000 in year one, $270,000 in years 2 though 4, and $200,000 in year5. the discount rate that your firm uses for projects of this type..
Under the US sentencing Guideline, the culpability score of the organization might be mitigated if High-level personal were involoved
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