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Merton Shovel Corporation has decided to bid for a contract to supply shovels to the Honduran Army. The Honduran Army intends to buy 1,000 shovels per year for the next 3 years. To supply these shovels, Merton will have to acquire manufacturing equipment at a cost of $175,000. This equipment will be depreciated on a straight-line basis over its five-year lifetime. At the end of the third year, Merton can sell the equipment for exactly its book value ($70,000). Additional fixed costs will be $35,000 per year, and variable costs will be $3 per shovel. An additional investment of $22,500 in net working capital will be required when the project is initiated. This investment will be recovered at the end of the third year. Merton Shovel has a 35 percent marginal tax rate and a 16 percent required rate of return on the project. What is the lowest possible per shovel price that Merton can offer for the contract and still create value for its stockholders? (Round answer to 2 decimal places, e.g. 15.25.)
Choose a firm/company that uses several different types of marketing communications to promote their products. Identify the firm and products you have selected to discuss. There are many ways a firm could promote its products. Different firms approac..
Which of the following assumptions would cause the constant growth stock valuation model to be invalid? The constant growth model is given below: P0 = [D0(1 + g)]/[(rs - g)]
A stock had returns of 18 percent, 11 percent, 17 percent, 14 percent, 19 percent, and -10 percent over the last six years. Required: (a) What is the arithmetic return for the stock? (b) What is the geometric return for the stock?
Which of the following ratios is incorrect?
The Market Place is considering a new four-year expansion project that requires an initial fixed asset investment of $2.8 million. The fixed asset will be depreciated straight-line to zero over its four-year tax life, after which time it will have a ..
Which of the following is not an example of political risk?
imagine that you have developed a computer game from scratch. nbspyou send it to several large game companies and none
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BlockOut Co. has 72,814 bonds outstanding that are selling at par value. The bonds yield 8.9 percent. The company also has 4.5 million shares of common stock outstanding. The stock has a beta of 1.11 and sells for $43.5 a share. The U.S. Treasury bil..
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What are the portfolio weights for a portfolio that has 170 shares of Stock A that sell for $91 per share and 145 shares of Stock B that sell for $110 per share? Consider the following information: State of Economy Probability of State of Economy Por..
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