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Robert montoya , inc case. Production of wine in unused section of the main plant. New machinery estimated cost 2,200,000 would be purchased, but shipping cost would be 18,000, an installation charges would add another 120,000 to the total equipment cost. Robert inventories (new product requires aging for 5 years ) would have to be increased by 100,000.this cash is assumed to occur at time of the initial investment . the machine has a remaining life of 4 years, and the company has a special tax allowing to depreciate at MARCrS 3 year class life. Under tax law depreciation allowances are 0.33, 0.45,0.15, and 0.07 in year 1 through 4. the machine has a salvage value of 150,000 after 4 years. Montoya management expect to sell 100,000 bottles each of the next 4 years at a wholesale price 40$ per bottle but $32 would be needed to cover cash operating costs. Robert federal- state tax rat is 40% and its overall cost of capital is 10%. Construct cash flow statement computing the incremental cash flows MOntoya should consider valuing this project.
On July 1, 2014, Agincourt Inc. made two sales. It sold land having a fair value of $915,000 in exchange for a 4-year zero-interest-bearing promissory note in the face amount of $1,389,036. The land is carried on Agincourt’s books at a cost of $591,1..
Fresh Water, Inc. sold an issue of 7-year $1,000 par value bonds to the public. The bonds have a 9.14 percent coupon rate and pay interest annually. The current market rate of interest on the Fresh Water, Inc. bonds is 8.04 percent. What is the curre..
Companies want to make the best marketing decisions possible regarding which customers to pursue, which products or services to introduce or promote, where to sell their products or services, and at what price. Although not perfect, the use of market..
Billy’s Exterminators, Inc., has sales of $746,000, costs of $300,000, depreciation expense of $52,000, interest expense of $36,000, a tax rate of 35 percent, and paid out $90,000 in cash dividends. The firm has 100,000 shares of common stock outstan..
Sue wants to buy a car that costs $20,000. She has arranged to borrow the total purchase price of the car from her credit union at a simple interest rate equal to 12 percent. The loan requires quarterly payments for a period of five years. If the fir..
Accrual income versus cash flow for a period Thomas Book Sales, Inc., supplies textbooks to college and university bookstores. The books are shipped with a proviso that they must be paid for within 30 days but can be returned for a full refund credit..
What is an IPO, and what role does an investment banker play in the process? Suppose you own a security that you know can be easily sold in the secondary market, but the security will sell at a lower price than you paid for it. What would this mean f..
Suppose the call money rate is 6.8 percent, and you pay a spread of 1.9 percent over that. You buy 1,100 shares at $55 per share with an initial margin of 40 percent. One year later, the stock is selling for $61 per share, and you close out your posi..
Assume NEWC has an investment opportunity (similar to the air bag opportunity in Other People's Money).The firm can spend $325 Million on refurbishing its wire and cable plant to develop a product that will be sold in packets or units of twenty. Assu..
You have a car loan with a nominal rate of 7.75 percent. With interest charged monthly, what is the effective annual rate (EAR) on this loan?
Using the free cash flow valuation model to price an IPO Assume that you have an opportunity to buy the stock of CoolTech, Inc., an IPO being offered for $12.50 per share. Although you are very much interested in owning the company, Use the free cash..
Compute the Net Present Value, Payback Period and the Internal Rates of Return for each alternative - on the basis of your analysis , which of the alternatives would you recommend?
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