Guaranteed investment contract

Assignment Help Financial Management

Reference no: EM131998757

1. You have purchased a guaranteed investment contract (GIC) from an insurance firm that promises to pay you a 7% compound rate of return per year for 6 years. If you pay $10,000 for the GIC today and receive no interest along the way, you will get __________ in 6 years (to the nearest dollar).

2. The Salty Sailboats Corporation is considering whether or not to launch its new Chris-class sailboat. Marketing research says the new sailboat will sell 61 units per year. The selling price will be $50,000 per boat. The variable costs per boat will be 40% of selling price, and fixed costs will be $600,000 per year. The total investment needed to undertake the project is $4,500,000. This amount (I) will be depreciated straight-line to zero over the five-year life of the equipment. The salvage value is zero, and there are no working capital consequences. Salty Sailboats has a 20 percent required return on new projects. At 20 percent, the five-year annuity factor is 2.9906, so the project has a zero NPV when the present value of the operating cash flows equals the $4,500,000 investment. Because the cash flow is the same each year, we can solve for the unknown amount by viewing it as an ordinary annuity. Since the five-year annuity factor at 20 percent is 2.9906, the OCF* can be determined as follows: OCF*= $4,500,000/2.9906.

What is the Contribution Margin per unit? with explanation please

$40,000

$50,000

$10,000

$30,000

Reference no: EM131998757

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