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Bobs Bikes Ltd has recently (late 2003) completed a $100,000, two-year marketing study on introducing a new tricycle model. Based on the results of the study, Bobs Bikes expects to sell 1,000 of the new tricycles in 2004 at a price of $300 each. Sales volume will grow at 10% p.a. for the four years through to 2007 in real terms and Bobs expects that the price for each tricycle will increase along with the expected inflation rate of 5% p.a.Bobs will need to buy a tricycle welding machine for $500,000. The machine will be depreciated for tax purposes over five years using straight line depreciation. The incremental labour expenses to produce the tricycles will be $100,000 p.a. without allowing for inflation. Materials are expected to cost $100 per tricycle in 2004 dollars Labour and materials prices will grow with inflation. Bobs Bikes also expects that the company will need $100,000 in working capital to run the business; this amount is not expected to grow.Bobs Bikes is an ongoing, profitable business and pays taxes at a 30% rate on all income. Bobs Bikes has a 50% target debt/equity ratio, a nominal cost of equity of 14% p.a. and a nominal cost of debt of 8% p.a. At the end of 2007 Bobs Bikes plans to consider the following alternatives:(a) Sell the welding machine for $200,000 and close the tricycle business; or(b) Sell the tricycle business for an after-tax price of five times the 2007 after-tax profit
Assume the euro is quoted at 0.7064-80 in London and the pound sterling is quoted at 1.6244-59 in Frankfurt.
State whether you would expect them to distribute a relatively high or low proportion of current earnings and whether you would expect them to have relatively high or low price-earnings ratio.
Describe one motive for pursuing a M&A? Illustrate and provide an example of one commonly employed term in M&A? Define three types of M&A's?
A company has a degree of combined leverage of 1.25. Price per unit is $15 and variable cost per unit is $5. Interest costs is $10,000 and fixed costs are $190,000.
John borrows $150,000. The terms of the loan are 7.5 percent over the next five years. It is important to note that he makes yearly rather than monthly payments.
Why is the yield on bonds A and B 5%? Why is the yield on bond C different and what would be the price of Bond A
Computation of the Internal rate of Return of capital project and What is the IRR for the following project if its initial cost
Chip's Home Brew Whiskey management forecasts that if the firm sells each bottle of Snake-Bite for $20, then the demand for the product will be 15,000 bottles per year, determine the effect of the price increase on the firm's FCF for the year
The general manager of the Miami Dolphin a NFL Team is planning paying $2.5 million per year for a Star player, along with a 2$ million up front signing bonus.
Janjigian Company's stockholders have provided $15,250 of capital, part when they purchased new issues of stock and part when they allowed management to retain some of the company's earnings.
Calculate Dahl's 20X6 consolidated net income and identify the amount attributable to Dahl's shareholders and to the non-controlling interest. Be sure to show all your calculations. You are not required to prepare a consolidated income statement.
Computation of stock price and Market value and market capitalization and beta and How many shares of stock does Dell have outstanding
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