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Howell Petroleum is considering a new project that complements its existing business. The machine required for the project costs $3.88 million. The marketing department predicts that sales related to the project will be $2.58 million per year for the next four years, after which the market will cease to exist. The machine will be depreciated down to zero over its four-year economic life using the straight-line method. Cost of goods sold and operating expenses related to the project are predicted to be 20 percent of sales. Howell also needs to add net working capital of $230,000 immediately. The additional net working capital will be recovered in full at the end of the project’s life. The corporate tax rate is 34 percent. The required rate of return for Howell is 15 percent. What is the NPV for this project? (Enter your answer in dollars, not millions of dollars (e.g., 1,234,567). Do not round intermediate calculations and round your final answer to 2 decimal places (e.g., 32.16).)
An investor has engaged in the following transactions on the futures market. What is the profit/loss from these transactions? What is the overall profit/loss?
The par value is $1000, and the coupon rate equals 7%. If the markets required return on the bond is 8%, then what is the bond's market price?
The firm’s current liabilities consist of only accounts payable, accruals, and notes payable. What is its free cash flow?
Janicek Corp. is experiencing rapid growth. What is the projected dividend for the coming year?
The Wrangler Co. has expected EBIT = $9,250, debt with a face and market value of $14,000 paying a 9% annual coupon, and an unlevered cost of capital of 12%. If the tax rate is 39%, what is the value of Wrangler's equity?
Reward-to-Risk Ratios. Stock Y has a beta of 1.50 and an expected return of 16 percent. Stock Z has a beta of .70 and an expected return of 11.5 percent. If the risk-free rate is 5.5 percent and the market risk premium is 8 percent, are these stocks ..
the discussion board db is part of the core of online learning. classroom discussion in an online environment requires
Taste Good Chocolates develops a new candy bar and plans to sell each bar for $1. Taste Good predicts that 1 million candy bars will be sold in the first year if the new candy bar is produced and sold, and includes $1 million of incremental revenues ..
Explain the arbitrage opportunity that exists and how an investor can take advantage of it.Give specific details about how to form the portfolio, what to buy and what to sell.
Assume no capital expenditures have been made since acquisition.
Warmack Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $570,000 is estimated to result in $240,000 in annual pretax cost savings. The shop’s tax rate is 30 percent and its discount..
Discuss the steps in cost-benefit analysis. Explain how cost-benefit analysis may be useful in your organization.
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