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Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.58 million. The fixed asset falls into the three-year MACRS class. The project is estimated to generate $2,040,000 in annual sales, with costs of $743,000. The project requires an initial investment in net working capital of $260,000, and the fixed asset will have a market value of $280,000 at the end of the project. If the tax rate is 34 percent, what is the project’s Year 0 net cash flow? Year 1? Year 2? Year 3? (MACRS schedule) If the required return is 15 percent, what is the project's NPV?
Yang Corp. is growing quickly. Dividends are expected to grow at a rate of 28 percent for the next three years, with the growth rate falling off to a constant 6.4 percent thereafter. Required: If the required return is 16 percent and the company just..
Precise Machinery is analyzing a proposed project. The company expects to sell 2,100 units, give or take 5 percent. The expected variable cost per unit is $260 and the expected fixed costs are $589,000. Cost estimates are considered accurate within a..
What is the yield to maturity on a 10-year, 9% annual coupon, $1,000 par value bond that sells for $887.00? That sells for $1,134.20? What does a bond selling at a discount or at a premium tell you about the relationship between rd and the bond’s cou..
Talbot Industries is considering an expansion project. The necessary equipment could be purchased for $11 million, and the project would also require an initial $5 million investment in net operating working capital. The company's tax rate is 40%. Wh..
The following is from an article in the Wall Street Journal, describing events in the market for Treasury securities on the given day:” Treasury prices were mixed, with the shorter end of the yield curve rising and the longer- dated Treasury’s fallin..
Tocserp is considering the purchase of a new machine that will produce widgets. The widget maker will require an initial investment of $10,000 and has an economic life of five years and will be fully depreciated by the straight line method. What is t..
Fred Flintstone has just become the product manager for Yabba Dabba Doo, a consumer packaged product with a retail price of $2.00. Retail margins on the product are 33%, while wholesalers take a 12% margin. How many units will Yabba have to sell next..
In April 2013 a pound of apples cost $1.48, while oranges cost $1.12. Three years earlier the price of apples was only $1.27 a pound and that of oranges was $.98 a pound. a. What was the annual compound rate of growth in the price of apples What was ..
Capital gains taxes Perkins Manufacturing is considering the sale of two nondepreciable assets, X and Y. Asset X was purchased for $2,000 and will be sold today for $2,250. Asset Y was purchased for $30,000 and will be sold today for $35,000. The fir..
An investment of $83 generates after-tax cash flows of $46.00 in Year 1, $70.00 in Year 2, and $131.00 in Year 3. The required rate of return is 20 percent. The net present value is
Suppose the dividends for the Seger Corporation over the past six years were $1.21, $1.29, $1.38, $1.46, $1.56, and $1.61, respectively. Compute the expected share price at the end of 2014 using the perpetual growth method. Assume the market risk pre..
A corporation has 10,000,000 shares of stock outstanding at a price of $60 per share. They just paid a dividend of $3 and the dividend is expected to grow by 6% per year forever. The stock has a beta of 1.2, the current risk free rate is 3%, and the ..
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