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Internal rate of return Peace of Mind, Inc. (PMI), sells extended warranties for durable consumer goods such as washing machines and refrigerators. When PMI sells an extended warranty, it receives cash up front from the customer, but later PMI must cover any repair costs that arise. An analyst working for PMI is considering a warranty for a new line of big-screen TVs. A consumer who purchases the 2-year warranty will pay PMI $200. On average, the repair costs that PMI must cover will average $106 for each of the warranty’s 2 years. If PMI has a cost of capital of 7%, should it offer this warranty for sale?
Accounts receivable represents credit sale, and thus, cannot be collected until maturity. Accounts receivable mainly consists of promissory notes and credit sales. Accounts receivable is part of the current assets.
Winston Enterprises would like to buy some additional land and build a new factory. The anticipated total cost is $136 million. The owner of the firm is quite conservative and will only do this when the company has sufficient funds to pay cash for th..
The Nelson Company has $1,350,000 in current assets and $500,000 in current liabilities. Its initial inventory level is $250,000, and it will raise funds as additional notes payable and use them to increase inventory. What will be the firm's quick ra..
IbreOffice has 85,000 shares of common stock outstanding at a price of $62 a share. They also have 10,000 shares of preferred stock outstanding at a price of S85 a share. The firm has 10,000 8 percent, 20-year bonds outstanding, with a face value of ..
A firm wants a sustainable growth rate of 3.03 percent while maintaining a 25 percent dividend payout ratio and a profit margin of 4 percent. The firm has a capital intensity ratio of 2. What is the debt-equity ratio that is required to achieve the f..
If you deposit money today in an account that pays 6% annual interest, how long will it take to double your money? Round your answer to two decimal places.
As a graduating senior, Gwen Kumora of Manhattan, Kansas, is eager to enter the job market at an anticipated annual salary of $34,000. Assuming an average inflation rate of 3 percent and an equal cost-of living raise, what will Gwen’s salary be in te..
Use the following information on states of the economy and stock returns to calculate the standard deviation of returns. State of Economy -Probability of State of Economy -Security Return If State Occurs
Honey Bee is thinking about purchasing a new clam maker for $14,000. The expected net cash flows resulting from the digger are $9,000 in year 1, $7,000 in the 2nd year, $5,000 in the 3rd year, and $3,000 in the 4th year. Assuming that the cost of cap..
Upper Gullies Corp. just paid a dividend of $2.10 per share. The dividends are expected to grow at 21 percent for the next eight years and then level off to a growth rate of 7 percent indefinitely. If the required return is 14 percent, what is the pr..
The amount borrowed on a loan equals:
Securities whose returns tend to move in tandem with the market on average have a beta of 1. Securities that tend to move more than the market have betas higher than 0. Beta corresponds to the slope of the best fitting line in the plot of the securit..
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