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With the growing popularity of casual surf print clothing, two recent MBA graduates decided to broaden this casual surf concept to encompass a “surf lifestyle for the home.” With limited capital, they decided to focus on surf print table and floor lamps to accent people’s homes. They projected unit sales of these lamps to be 8,300 in the first year, with growth of 4 percent each year for the following four years (Years 2 through 5). Production of these lamps will require $48,000 in networking capital to start. Total fixed costs are $108,000 per year, variable production costs are $16 per unit, and the units are priced at $44 each. The equipment needed to begin production will cost $188,000. The equipment will be depreciated using the straight-line method over a five-year life and is not expected to have a salvage value. The effective tax rate is 39 percent, and the required rate of return is 25 percent. What is the NPV of this project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
MF Corp. has an ROE of 12% and a plowback ratio of 50%. If the coming year's earnings are expected to be $4 per share, at what price will the stock sell? The market capitalization rate is 14%. What price do you expect MF shares to sell for in three y..
You are considering an investment in Fields and Struthers, Inc., and want to evaluate the firm’s free cash flow. From the income statement, you see that Fields and Struthers earned an EBIT of $72 million, had a tax rate of 30 percent, and its depreci..
Find the future values of these ordinary annuities. Compounding occurs once a year. a. $400 per year for 10 years at 10% b. $200 per year for five years at 5% c. $400 per year for 5 years at 0% d. rework Parts a, b, and c assuming they are annuities ..
Calculate Company A’s weighted average cost of debt, given the following information: (a) Tax Rate: 15%, (b) Average Price of Outstanding Bonds: $985.00, (c) Coupon Rate: 4%, (d) NPER: 12, (e) Debt: $25,000,000, (f) Equity: $22,000,000, and (g) Prefe..
Suppose you have $30,000 to invest. You’re considering Miller-Moore Equine Enterprises (MMEE), which is currently selling for $50 per share. You also notice that a call option with a $50 strike price and six months to maturity is available. What is y..
An asset used in a four-year project falls in the five-year MACRS class for tax purposes. The asset has an acquisition cost of $6,080,000 and will be sold for $1,280,000 at the end of the project. If the tax rate is 35 percent, what is the aftertax s..
Aerotron Electronics is considering purchasing a water filtration system to assist in circuit board manufacturing. The system costs $40,000. It has an expected life of 7 years, at which time its salvage value will be $7,500. Operating and maintenance..
A successful joint venture is expected to result in the 4.0% growth rate until 2000 but would increase the company’s normal growth rate to a constant 8.00% after that time. The joint venture also is expected to increase investors’ required return to ..
Kampfire, Inc., a very successful manufacturer of camping equipment, is considering going public next month to raise funds to help finance the company’s future growth. The financial manager of Kampfire has approached the investment banking firm at wh..
Ferd Rumpledink at UBS now observes the data below for the USD and the CHF. He still has 10,000,000 USD or the CHF equivalent (at the current spot rate) to invest for 180 days. Can Ferd make an arbitrage profit on this situation?
Butterfly Tractors had $14 million in sales last year. Cost of goods sold was $8 million, depreciation expense was $2 million, interest payment on outstanding debt was 1mil and the firm’s tax rate was 35%. What would happen to net income & cash flow ..
You have a bond with annual coupon payments of $30, the interest rate for comparable bonds is 5%, and there is a maturity value of $150 in 4 years. What is the current price of the bond? You buy a bond that is selling at par. ($100 face value, 8% cou..
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