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You are considering adding a new software title to those published by your highly successful software company. If you add the new product, it will use capacity on your disk duplicating machines that you had planned on using for your flagship product, “Battlin’ Bobby.” You had planned on using the unused capacity to start selling “BB” on the west coast in two years. You would eventually have had to purchase additional duplicating machines 10 years from today, but using the capacity for your new product will require moving this purchase up to 2 years from today. If the new machines will cost $115,000 and will be depreciated straight-line over a 5-year period to a zero salvage value, your marginal tax rate is 32 percent, and your cost of capital is 12 percent, what is the opportunity cost associated with using the unused capacity for the new product? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.)
Please help me to answer the following questions with tables, figures, and addenda for financial analysis Apple Company in Assessing A Company’s Future Financial Health. Analysis of fundamentals: goals, strategy, market, competitive technology, and r..
Suppose the company cancels the dividend and announces that it will use the money saved to repurchase shares. What happens to the stock price on the announcement date?
Based on the pecking-order theory of capital structure, what are the assumptions for Miller and Modigliani that have been relaxed?
Illustrates the potential consequences of a business deciding to apply a single technique to all corporate investment decisions.
Suppose you know that a company’s stock currently sells for $51 per share and the required return on the stock is 11 percent. You also know that the total return on the stock is evenly divided between a capital gains yield and a dividend yield. If it..
Your company has spent $320,000 on research to develop a new computer game. The firm is planning to spend $52,000 on a machine to produce the new game. Shipping and installation costs of the machine will be capitalized and depreciated; The firm has a..
Dave Co. owns aging machines and is considering buying new ones. Dave Co. is considering replacing their older machines to take advantage of the higher potential day rates for their contracts over the next five years. Assume that Dave Co. faces a 40%..
A project is expected to create operating cash flows of $22,500 a year for three years. The initial cost of the fixed assets is $50,000. These assets will be worthless at the end of the project. An additional $3,000 of net working capital will be req..
Company Z issued bonds with detachable warrants several years ago. Each warrant allows the holder to purchase one share of stock at $30 per share. The stock has a beta of 1.3. Calculate the exercise value of the warrants if the price of the underlyin..
Advance, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 10 years to maturity that is quoted at 108 percent of face value. The issue makes semiannual payments and has a coupon rate of 9 percent annually. What..
AA Industries's stock has a beta of 1.7. The risk-free rate is 5%, and the expected return on the market is 11%. What is the required rate of return on AA's stock?
The Role of Financial Management in a Firm. Describe why a manager needs to understand the characteristics and importance of financial markets including risk and efficiency
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