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Schweser Satellites Inc. produces satellite earth stations that sell for $95,000 each. The firm's fixed costs, F, are $2.5 million, 50 earth stations are produced and sold each year, profits total $400,000; and the firm's assets (all equity financed) are $4 million. The firm estimates that it can change its production process, adding $4 million to investment and $380,000 to fixed operating costs. This change will (1) reduce variable costs per unit by $7,000 and (2) increase output by 20 units, but (3) the sales price on all units will have to be lowered to $89,000 to permit sales of the additional output. The firm has tax loss carry forwards that render its tax rate zero, its cost of equity is 12%, and it uses no debt.
Much to your surprise, you were selected to appear on the TV show, "The Price is Right." As a result of your prowess in identifying how many rolls of toilet paper an average American family keeps on hand, you win the opportunity to choose one of the ..
In a perfect world, a firm would prefer to have a positive operating cycle, negative operating cycle, and positive cash conversion cycle. Negative cash conversion cycle. Both the inventory conversion period and payables deferral period use the averag..
Your consulting firm will produce cash flows of $200,000 this year, and you expect cash flow to keep pace with any increase in the general level of prices. The interest rate currently is 5%, and you anticipate inflation of about 1%. What is the prese..
Marshall's & Co. purchased a corner lot in Eglon City five years ago at a cost of $640,000. The lot was recently appraised at $810,000. At the time of the purchase, the company spent $50,000 to grade the lot and another $4,000 to build a small buildi..
Manu Inc. ("Manu") is a specialized manufacturing corp that has been in business for 22 years. Walter and Jane Smith, husband and wife, founded the business and own 60 percent of Manu's outstanding common stock. Linda wants to know if she has any rig..
A project requires an upfront investment of $20,000, to be paid today. It will generate annual cash flows for 5 years that grow at 10% per year, after which the project will end with no residual value. Year 1 cash flows will be $5,000. The appropriat..
You have just won the Play-to-win Lottery, which pays you $1 million today and another 10 annual payments that increase by $400,000 per year. Therefore, in one year, you receive $1.4 million, in two years you get $1.8 million and so on. If the approp..
Mark Ventura has just purchased an annuity to begin payment at the end of 2016 (that is the date of the first payment). Assume it is now the beginning of the year 2014. The annuity is for $20,000 per year and is designed to last 8 years. If the inter..
Common stock valuelong dash—Variable growth. Newman manufacturing is considering a cash purchase of the stock of Grips Tool. During the year just? completed, Grips earned ?$3.963.96 per share and paid cash dividends of ?$2.262.26 per share ?(D0equals..
Calculate the current price of a $5,000 par value bond that has a coupon rate of 17 percent, pays coupon interest quarterly (i.e., 4 times per year), has 29 years remaining to maturity, and has a current yield to maturity (discount rate) of 9 percent
Your company is going to start a new project using retained earnings. calculate the Weighted Average Cost of Capital (WACC) before the project begins
The interest on an investment may be compounded or the payment on a loan may be discounted:
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