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The Best Manufacturing Company is considering a new investment. Financial projections for the investment are tabulated here. The corporate tax rate is 40 percent. Assume all sales revenue is received in cash, all operating costs and income taxes are paid in cash, and all cash flows occur at the end of the year. All net working capital is recovered at the end of the project. Year 0 Year 1 Year 2 Year 3 Year 4 Investment $ 34,000 Sales revenue $ 17,500 $ 18,000 $ 18,500 $ 15,500 Operating costs 3,700 3,800 3,900 3,100 Depreciation 8,500 8,500 8,500 8,500 Net working capital spending 400 450 500 400 ? a. Compute the incremental net income of the investment for each year. (Do not round intermediate calculations.) Year 1 Year 2 Year 3 Year 4 Net income $ $ $ $ b. Compute the incremental cash flows of the investment for each year. (Do not round intermediate calculations. A negative answer should be indicated by a minus sign.) Year 0 Year 1 Year 2 Year 3 Year 4 Cash flow $ $ $ $ $ c. Suppose the appropriate discount rate is 10 percent. What is the NPV of the project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV $
The Nullcom Inc. is considering to purchase a new machine. The cost of the machine is $200,000 and installation of $10,000. The machine will be depreciated straight-line to zero. The new machine needs an increase of new working capital of $30,000. Wh..
Describe how EACH of the traits should be considered when evaluating candidates. Finally, identify one trait that is or is not a match to your personality.
ILK has preferred stock selling for 96 percent of par that pays a 5 percent annual coupon. What would be ILK’s component cost of preferred stock?
Which is a better measure of stock market performance? Why?
What is the duration of a two-year bond that pays an annual coupon of 11.9 percent and has a current yield to maturity of 13.9 percent? Use $1,000 as the face value. What is the duration of a two-year zero-coupon bond that is yielding 11.5 percent?
At the beginning of the year, you invest $1,000 in a company's common stock. What is the rate of return on your investment?
Cal Lury owes $38,000 now. A lender will carry the debt for seven more years at 8 percent interest. That is, in this particular case, the amount owed will go up by 8 percent per year for seven years. The lender then will require that Cal pay off the ..
Post work would be best. The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price $1,080,000, and it would cost another $22,500 to install it. The machine falls into MACRS 3- year class, and ..
The following property information is provided. Net operating income (NOI) $85,000 Debt service (DS) $62,500 Mortgage Amount $610,000 Loan-to-value ratio (M) 0.80 a. Calculate the indicated debt coverage ratio.
An investor has protective put position that consists of one long put option and one share of underlying stock. Calculate the break-even price for the investor.
What is the value of the warrants that were attached to the second issue?
You estimate that your cattle farm will generate $.20 million of profits on sales of $4 million under normal economic conditions and that the degree of operating leverage is 5. What will profits be if sales turn out to be $3.2 million? What if they a..
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