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Three eye-ear-nose-and-throat physicians decide to hire an experienced audiologist in order to add a new service line to their practice.* They ask the practice manager to prepare a three-level volume forecast as a first step in their decision-making. Assumptions: for the base level (most likely) revenue forecast, assume $200 per proce- dure times 4 procedures per day times 5 days equals 20 procedures per week times 50 weeks per year equals 1,000 potential procedures per year. For the best case revenue forecast, assume an increase in volume of one procedure per day average, for an annual increase of 250 procedures (5 days per week times 50 weeks equals 250). (The best case is if the practice gains a particular managed care contract.) For the worst case revenue forecast, assume a decrease in volume of 2 procedures per day average, for an annual decrease of 500 procedures. (The worst case is if the practice loses a major payer.) *Audiologists were designated as “eligible for physician and other prescriber incentives” as discussed elsewhere. Thus the new service line was a logical move. Required Using the above assumptions, prepare a three-level forecast similar to the example in Figure 17–5 and document your calculations.
Burnwood Tech plans to issue some $56.65 par preferred stock with a 6.87% dividend. A similar stock is selling on the market for $50.45. Burnwood must pay flotation costs of 9.69% of the issue price. What is the cost of the preferred stock?
You will receive a $80,000 inheritance in 10 years. You could invest that money today at 9% compounded semi annually. What is the present value of your inheritance?
Your retirement fund consists of a $ 5,000 investment in each of 15 different common stocks. The portfolio's beta is 1.20. Suppose you sell one of the stocks with a beta of 0.8 for $ 5,000 and use the proceeds to buy another stock whose beta is 1.6. ..
Valdes Enterprises is considering issuing a 10-year convertible bond that would be priced at its $1,000 par value. The bonds would have an 8.00% annual coupon, and each bond could be converted into 20 shares of common stock. What is the estimated flo..
Zero-coupon bond with a par value of $1000, maturity of 5 years is traded for $630,12. Is it reasonable to invest in this bond, if investor considers the alternative investment with 12% annual return?
The financial manager evaluates various considerations to take their business decisions. Two of the most important are the risk and performance. There are three types of preferences for risk: (averse), the neutral and to look for (seeking).
Fullerton Wine Company is a retailer which sells vintage wines. The company has established a policy of reordering inventory every 30 days.
You have the following capital budgeting timeline with their periods and cash flows: 0 = ?, 1 = $4500, 2 = $4900, 3 = ?, 4 = ?, 5 = $4000, 6 = $3750. The terminal value of the project is $34,806.73. What is the amount of the initial cash outflow at p..
A trader has a put option contract to sell 100 shares of a stock for a strike price of $650. What is the effect on the terms of the contract of:
A company's 8% coupon rate, semi-annual payment, $1,000 par value bond that matures in 25 years sells at a price of $619.33. The company's federal-plus-state tax rate is 30%. What is the firm's after-tax component cost of debt for purposes of calcula..
Stock rights provide the stockholder with a. cumulative voting privileges b. the opportunity to receive extraordinary earnings c. the right to elect the board of directors d. certain purchase privileges of additional stock shares in direct proportion..
What factors affect a firm's degree of transaction exposure in a particular currency? For each factor, explain the desirable characteristics that would reduce transaction exposure.
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