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You are evaluating a project for The Ultimate recreational tennis racket, guaranteed to correct that wimpy backhand. You estimate the sales price of The Ultimate to be $420 per unit and sales volume to be 1,000 units in year 1; 1,250 units in year 2; and 1,325 units in year 3. The project has a 3-year life. Variable costs amount to $235 per unit and fixed costs are $100,000 per year. The project requires an initial investment of $171,000 in assets, which will be depreciated straight-line to zero over the 3-year project life. The actual market value of these assets at the end of year 3 is expected to be $37,000. NWC requirements at the beginning of each year will be approximately 20 percent of the projected sales during the coming year. The tax rate is 30 percent and the required return on the project is 12 percent. (Use SL depreciation table) What will the cash flows for this project be?
Suppose the government announces that, based on a just-completed survey, the growth rate in the economy is likely to be 2 percent in the coming year, as compared to 5 percent for the past year. Will security prices increase, decrease, or stay the sam..
The American Baker’s Association reports that annual sales of bakery goods last year rose 15 percent, driven by a 50 percent increase in the demand for bran muffins. Most of the increase was attributed to a report that diets rich in bran help prevent..
Raffalovich, Inc., is expected to maintain a constant 5.6 percent growth rate in its dividends, indefinitely. If the company has a dividend yield of 4.1 percent, what is the required return on the company’s stock?
Suppose that the index model for stocks A and B is estimated from excess returns with the following results: RA = 1.6% + 0.70RM + eA RB = –1.8% + 0.9RM + eB σM = 22%; R-squareA = 0.20; R-squareB = 0.15 what is the standard deviation of each stock?
Watters Umbrella Corp. issued 15-year bond two years ago at a coupon rate of 6.8 percent. The bonds make semi annual payments. What is the bonds price per $100 face value? If these bonds currently sell for 105 percent of par value, what is the YTM?
Using the P/E ratio approach to valuation, calculate the value of a share of stock under the following conditions: The investor's required rate of return is 13 percent. the expected level of earnings at the end of this year is $4. Now show that you g..
Net Income ____ cash because corporations must use the ____ accounting method which means revenue can include ___ and expenses can include ______.
Suppose you borrow $50000 when financing a coffee shop which is valued at $75000. You expect to generate a cash flow so $84000 if demand is as expected. The cost of debt is 4%. What should the value of equity be?
You borrow $240,000; the annual loan payments are $36,552.05 for 30 years. What interest rate are you being charged? Round your answer to two decimal places. Find the amount to which $300 will grow under each of these conditions:
Caballos, Inc., has a debt to capital ratio of 18%, a beta of 1.4 and a pre-tax cost of debt of 7.6%. The firm had earnings before interest and taxes of $ 618 million for the last fiscal year, after depreciation charges of $ 249 million. The firm had..
An asset has had an arithmetic return of 10.8 percent and a geometric return of 8.8 percent over the last 86 years. What return would you estimate for this asset over the next 7 years? 21 years? 28 years?
A 20-year maturity bond with face value of $1,000 makes semiannual coupon payments and has a coupon rate of 6%. What is the bond’s yield to maturity if the bond is selling for $1,080?
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