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Consider a project to supply Detroit with 31,000 tons of machine screws annually for automobile production. You will need an initial $1,333,000 investment in threading equipment to get the project started; the project will last for 6 years. The accounting department estimates that annual fixed costs will be $279,000 and that variable costs should be $130 per ton; accounting will depreciate the initial fixed asset investment straight-line to zero over the 6-year project life. It also estimates a salvage value of $299,000 after dismantling costs. The marketing department estimates that the automakers will let the contract at a selling price of $130 per ton. The engineering department estimates you will need an initial net working capital investment of $279,000. You require a 16 percent return and face a marginal tax rate of 36 percent on this project. a. The estimated OCF for this project is $ and the NPV is $. (Do not include the dollar signs ($). Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places. (e.g., 32.16)) b. Suppose you believe that the accounting department's initial cost and salvage value projections are accurate only to within ±15 percent; the marketing department's price estimate is accurate only to within ±11 percent; and the engineering department's net working capital estimate is accurate only to within ±7 percent. Your worst-case NPV for this project is $ and your best-case NPV is $. (Do not include the dollar signs ($). Negative amount should be indicated by a minus sign. Round your answers to 2 decimal places. (e.g., 32.16))
The Green Giant has a 6 percent profit margin and a 65 percent dividend payout ratio. The total asset turnover is 1.5 and the equity multiplier is 1.6. What is the sustainable rate of growth?
Beta company is considering buying a widget fogger, It will cost $25000 to purchase and $5000 to install. It will be depreciated SACRS ( 20 % 40 % 15 % 15 % 10 % ) and will last four years before being sold as scrap for $3000. Beta s tax rate is 20 %..
A firm sells its $1,170,000 receivables to a factor for $1,134,900. The average collection period is 1 month. What is the effective annual rate on this arrangement?
A home identical to yours in your neighborhood, sold last week for $150,000. Your home has a $120,000 assumable, 8% mortgage (compounded annually) with 30 years remaining. An assumable mortgage is one that the new buyer can assume at the old terms, c..
Concept Caching of Subsaharan Africa
Highlight APY (APR) at your bank statement, or credit card statement. Explain what this number means. Find current 30 years mortgage interest rate. Calculate APR, if mortgage payment is made monthly. Then calculate APR, if mortgage payment is made bi..
This problem is useful for testing the ability of financial calculators and computer software. Consider the above cash flows. The IRRs, from smallest to largest, are____ percent, ___percent, ___percent, and ___percent.
Decker Tires’ free cash flow for the current year equals $1.32 million. Analysts expect the company's free cash flow to grow by 30% next year, by 10% in the year after that, and at a constant rate of 5% thereafter. The WACC for this company 9.00%. De..
Port Allen Chemical Company processes raw material D into joint products E and F. Raw material D costs $6 per liter. It costs $100 to convert 100 liters of D into 60 liters of E and 40 liters of F. Product F can be sold immediately for $6 per liter o..
A firm cannot pay dividend to its common stock until it has paid dividends to the preferred shareholders, and the company reserves the right to postpone the perferred stock dividend into next year in a bad performance year. This is ______________ of ..
The Neptune Company offers network communications systems to computer users. The company is planning a major investment expansion but is unsure of the correct measure of equity capital as it has no traded equity. Your job is to determine the basis of..
Suppose you hold LLL employee stock options representing options to buy 13,000 shares of LLL stock. LLL accountants estimated the value of these options using the Black-Scholes-Merton formula and the following assumptions:
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