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A Carlyle chemical is evaluating a new chemical compound used in the manufacture of a wide range of consumer products. The firm is concerned that inflation in the cost of raw materials will have an adverse effect on the projects cash flow. Specifically, the firm expects the cost per unit (which is currently $0.84) will rise at a rate of 13% annual rate over the next three years. The per-unit selling price is currently $0.95 and this price is expected to rise at a meagre 1% annual rate over the next three years. If Carlyle expects to sell 6.5, 7.5 and 8 million units for the next three years, respectively, what is your estimate of the gross profits to the firm? Based on these estimates, what recommendation would you offer the firm’s management with regard to this product? Round each unit price and unit cost to the nearest cent.
The gross profit or (loss) for year 1 is _____
The gross profit or (loss) for year 2 is _____
The gross profit or (loss) for year 3 is _____
A bakery decides to buy an oven. This oven will cost $7000 and is expected to last for 15 years. Annual operation and maintenance costs for the oven is 350 dollars per year and the salvage value for this type of oven is usually 4% of the original cap..
U.S. Telephone Cellular sells phones for $100. The unit variable cost per phone is $50 plus a selling commission of 10% (based on the unit sales price per phone). Fixed manufacturing costs total $1,040 per month, while fixed selling and administrativ..
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 th..
Find the break point in the Marginal Cost of Capital and determine the cost of each capital structure component.
Determine the optimal hedge ratio for Treasury bonds worth $3,000,000 with a modified duration of 12.45, yielding 11.9 percent if the futures have a price of $90,000, and modified duration of 8.5 years?
liquidity ratios. edison stagg and thornton have the following financial information at the close of business on july
The Walgreen Corporation is contemplating a new investment that it plans to finance using one-third debt. The firm can sell new $1000 par value bonds with a 15 year maturity at a price of $951 that carries a coupon interest rate of 13.8 percent that ..
Based upon following information, how much debt financing (as a %) would be required to finance the replacement of fully depreciated Property, Plant, and equipment (P.P.&E.)?
5 years ago, Barton Industries issued 25-year no callable, semi annual bonds with a $1,900 face value and a 10% coupon, semi annual payment ($95 payment every 6 months). The bonds currently sell for $845.87. If the firm's marginal tax rate is 40%, wh..
A fixed asset has an original cost of $32,000 and is three-fourths depreciated. The asset is sold for $10,000 – show how you derived your answer. What is the gain (+) or loss (-) on the sale of the asset. What amount is recorded in the CFO section of..
A company has net income of $265,000, a profit margin of 9.3 percent, and an accounts receivable balance of $145,300. Assuming 80 percent of sales are on credit, what are the company’s days’ sales in receivables?
Suppose the returns on long-term government bonds are normally distributed. Assume long-term government bonds have a mean return of 6.3 percent and a standard deviation of 9 percent.
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