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Consider a project to supply 109 million postage stamps per year to the U.S. Postal Service for the next five years. You have an idle parcel of land available that cost $1,990,000 five years ago; if the land were sold today, it would net you $2,190,000 after tax. The land can be sold for $2,390,000 after taxes in five years. You will need to install $5.49 million in new manufacturing plant and equipment to actually produce the stamps; this plant and equipment will be depreciated straight-line to zero over the project’s five-year life. The equipment can be sold for $590,000 at the end of the project. You will also need $690,000 in initial net working capital for the project, and an additional investment of $59,000 in every year thereafter. Your production costs are .59 cents per stamp, and you have fixed costs of $1,030,000 per year. If your tax rate is 34 percent and your required return on this project is 12 percent, what bid price should you submit on the contract?
Prepare a memo to you staff explaining the steps that will be needed to construct a pro-forma financial statement for your company. Be sure to address the following: The forecast 201 x income statements, The forecast the 201x balance Sheet, Raising t..
Describe how the premium charged by insurers are affected by the returns available to the holders of different types of investments
Suppose the current exchange rate for the Polish zloty is Z 2.76. The expected exchange rate in three years is Z 2.82. What is the difference in the annual inflation rates for the United States and Poland over this period? (Do not round intermediate ..
The 8% bonds of a company are currently selling at $1027. These bonds have 16years left until maturity. What is the current yield?
Determine the current value of the bond if present market conditions justify a 14 percent required rate of return.
You’ve observed the following returns on Doyscher Corporation’s stock over the past five years: –24.6 percent, 13.4 percent, 29.8 percent, 2.2 percent, and 21.2 percent. The average inflation rate over this period was 3.22 percent and the average T-b..
Prepare a statement of cash flows for Warnick Co. for the year ended May 31, Year2. Use the indirect method.
Atlantis Fisheries issues zero coupon bonds on the market at a price of $514 per bond. Each bond has a face value of $1,000 payable at maturity in 14 years. It is callable in 7 years at a call price of $640. Using semi annual compounding, what is the..
An increase in expected inflation would result in
Quetzalcoatl and Tonantzin each take out a 17-year loan of $L. Quetzalcoatl repays his loan using the amortization method, at an annual effective rate of i. He makes an annual payment of $500 at the end of each year.
The old machinery was purchased for $1 million 3 yrs ago, and is being depreciated on a straight-line basis over its 5 year life. Its economic life as of today, however, is estimated to be 5 years. It can be sold for $300,000 today.
Revarop, Inc., is a fast-growth company that is expected to grow at a rate of 23 percent for the next four years. It is then expected to grow at a constant rate of 6 percent. Revarop’s first dividend, of $4.45, will be paid in year 3. If the required..
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