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McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $760 per set and have a variable cost of $320 per set. The company has spent $126,000 for a marketing study that determined the company will sell 24,000 sets per year for seven years. The marketing study also determined that the company will lose sales of 5,000 sets of its high-priced clubs. The high-priced clubs sell at $1,220 and have variable costs of $620. The company will also increase sales of its cheap clubs by 4,000 sets. The cheap clubs sell for $420 and have variable costs of $150 per set. The fixed costs each year will be $8,400,000. The company has also spent $1,176,000 on research and development for the new clubs. The plant and equipment required will cost $24,000,000 and will be depreciated on a straight-line basis. The new clubs will also require an increase in net working capital of $1,105,000 that will be returned at the end of the project. The tax rate is 40 percent, and the cost of capital is 9 percent.
Suppose you feel that the values are accurate to within only ±6 percent. The best-case NPV is ____________ $ and worst-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)) (Hint: The price and variable costs for the two existing sets of clubs are known with certainty; only the sales gained or lost are uncertain.)
The CEO of the insurance company you work for sends back the firm’s proposed budget which you had drafted, asking you to explain how this budget supports the firm’s strategies and goals. Discuss how you might demonstrate that your proposed budget is ..
Describe the three steps involved in evaluating credit applicants. What are the primary sources of information about the creditworthiness of credit applicants?
Discuss the elements of zero-base budgeting. How does it work? What are the advantages and disadvantages of zero-base budgeting? Provide a real-life example of a user of this type of budgeting.
DPS Calculation Warr Corporation just paid a dividend of $1.50 a share (that is, D0 = $1.50). The dividend is expected to grow 7% a year for the next 3 years and then at 5% a year thereafter. What is the expected dividend per share for each of the ne..
Primrose Corp has $19 million of sales, $3 million of inventories, $2 million of receivables, and $3 million of payables. Its cost of goods sold is 70% of sales, and it finances working capital with bank loans at an 7% rate. By how much would pre-tax..
Kelly decided to accept the risk and purchased a high growth stock. Her returns for the past five years are 48 percent, 39 percent, -56 percent, 61 percent, and -24 percent, respectively. What is the standard deviation of these returns?
A stock will pay dividends of $1.20 starting in year 4. The dividends for year 5, year 6, and year 7 will grow by 25%, 20%, and 12%. Finally, the dividends will grow at a constant rate of 6% forever. The required return on the stock is 11%. What shou..
Meadow Brook Manor would like to buy some additional land and build a new assisted living center. The anticipated total cost is $28 million. Management has decided to save $1.4 million a quarter for this purpose. The firm earns 6 percent compounded q..
A nursing home projects asset growth at 10 percent per year over the next 10 years. If it wishes to reduce its reliance on debt financing, what rate of equity growth over the 10-year period will be desired?
As of today, the First ECON Bank of Austin currently holds: If we assume that that entire amount of the transaction deposits is a subject to the legal 10% reserve requirement, please indicate the required course of the bank’s action to manage its liq..
Assumption: no change in either fiscal or monetary policy, no change in exchange rate expectations, and that price are "sticky".
Suppose Netflix is considering the purchase of computer servers and network infra- structure to facilitate its move into video-on-demand services. In total, it will purchase $48 million in new equipment. What is the lease rate for which the lessor wi..
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