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A firm is analyzing the viability of a new product. Each year the product is expected to generate sales of $400, have variable costs of 20% of sales, and have fixed costs of $145. The equipment needed for production costs $480 and will be depreciated straight line to zero over the 4-year life of the project; its salvage value will be zero. The firm has other profitable opportunities sufficient to cover any losses. The tax rate is 40% and the cost of capital is 15%. Find the internal rate of return for the project. State your answer using the form X% < IRR < (X + 1)%. According to the internal rate of return method, should you accept or reject the project?
Suppose that a young couple has just had their first baby and they wish to ensure that enough money will be available to pay for their child’s college education. Assuming college savings are invested in an account paying 7% interest, then what is the..
If we hold the company's investment policy constant, then dividend policy is a tradeoff between cash dividends and the issue or repurchase of common stock. Explain fully, stating any assumptions you might make.
Compute the bid/ask percentage spread for Mexican pesos retail transactions in which the ask rate is $.11 and the bid rate is $.10? Capital one Bank considers borrowing $10 million Singapore dollars in the interbank market and investing the funds in ..
Jiminy's Cricket Farm issued a 30-year, 8 percent semi-annual bond 7 years ago. The bond currently sells for 88 percent of its face value. The book value of the debt issue is $16 million. The company's tax rate is 34 percent. What is the company's to..
Your firm is considering a new product development. an outlay of $90,000 is required for equipment, and an additional net working capital of $5000 is required. the project is expected to have a 4 year life, and the equipment will be depreciated on a ..
Rolling Company bonds have a coupon rate of 6.40 percent, 24 years to maturity, and a current price of $1,206. What is the YTM? The current yield?
What is the modified internal rate of return (MIRR) of the Powerball deal
Recommend a strategy for financial administrators to balance the tension between having inventory on hand when it is needed versus the carry cost to the organization. Provide support for your recommendation.
Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.79 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be w..
Keller Cosmetics maintains an operating profit margin of 8.45% and a sales-to-assets ratio of 3.80. It has assets of $590,000 and equity of $390,000. Interest payments are $39,000 and the tax rate is 40%. What is the return on assets? What is the ret..
Project XYZ requires an initial outlay of $400,000 and has a profitability index of 1.5. The project is expected to generate equal annual cash flows over the next twelve years. The required return for this project is 20%. What is project XYZ's net pr..
We learn from Gorton’s book that banks in August 2007 went right to the Federal Reserve discount window to replace other sources of liquidity that were becoming scarcer. In addition managers of the bank made public announcements that they were using ..
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