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We are evaluating a project that costs $864,000, has an eight-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 71,000 units per year. Price per unit is $49, variable cost per unit is $33, and fixed costs are $765,000 per year. The tax rate is 35 percent, and we require a return of 10 percent on this project.
a. Calculate the accounting break-even point. What is the degree of operating leverage at the accounting break-even point?
b. Calculate the base-case cash flow and NPV. What is the sensitivity of NPV to changes in the sales figure? Explain what your answer tells you about a 500-unit decrease in projected sales.
c. What is the sensitivity of OCF to changes in the variable cost figure? Explain what your answer tells you about a $1 decrease in estimated variable costs.
State at least 3 industry specific metrics for Caterpillar (CAT), Caterpillar is in the US Machinery industry.
Sisters Corp expects to earn $6 per share next year. The firm’s ROE is 15% and its plowback ratio is 60%. If the firm’s market capitalization rate is 10%. Calculate the price with the constant dividend growth model. What is the present value of its g..
You own a portfolio that has $2,000 invested in Stock A and $1,200 invested in Stock B. If the expected returns on these stocks are 12 percent and 12 percent, respectively, the expected return on the portfolio is
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If the investment continues to earn this same average, what the total amount be after 30 years?
Smith Inc. issued a bond with an annual coupon rate of 10% with interest paid Semi annually. The bond matures in 15 years. The par value of the bond is $1,000. If your required return for this type of bond is 15%, what is the price you are willing to..
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Which one of the following is a shortage cost associated with a firm's inventory?
how long will it take her to pay off the debt?
Consider an annual coupon bond with a face value of $100, 4 years until maturity, and a price of $75. the coupn rate on the bond is 7%. If you can reinvest coupons at a rate of 2.5% per annum, then how much money do you have if you hold the bond to m..
Inflation was 6% in the U.S and 2% in Germany, while during the same period of time the euro strengthened in nominal terms by 6% against the dollar. What happened to the real value of the euro (the $/euro exchange rate) during this period? The euros ..
BA515 - FINANCIAL MANEGEMENT ASSIGNMENT. What is the intrinsic value of a cochlear share if your required rate of return is 16% p.a? Estimate the cash flows for the project. Tabulate your answer
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