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You are pondering starting a company that specializes in high-end bicycles. Your initial investment would be $500,000 for depreciable equipment, which should last 5 years, and your tax rate would be 40%. You could sell a bike for $10,000, assuming your average variable cost per bike is $3000, and assuming fixed costs, such as rent, utilities and salaries, would be $200,000 per year. Assuming you could sell 60 bikes per year, what would be your IRR?
Contemporary financial management Follies bookstore, the only bookstore close to campus, had net income in 2005 of $90,000. Here are some of the financial ratios from the annual report. Profit Margin: 12%, Return on Assets: 20%, and debt to ratio: 55..
An at- the- money call option with a strike of 50, 24 days left to expiration and a risk free rate of 0.25% is trading at $1.03. Using the Black-Scholes formula, what will be the price of this option one day later, assuming that all other inputs rema..
Suppose that everything stays the same as was presented in the original problem (for example, the costs each year, the value of the hotel under the two scenarios, and the probability of the city being awarded the franchise) except for two things: Usi..
The town of Cedar Falls has decided to lease their parking meters for 10 years to a private company in order to raise revenue for some much needed road repairs. Cedar Falls' mayor informs you that she wants the deal with greatest Net Present Value (N..
What are the major categories of depository institution assets and their approximate percentage contribution to total resources? What are the major categories of depository institution liabilities? What are the fundamental differences between them?
Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.88 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life.
The spot rate for the Japanese yen currently is ¥105 per $1. The one-year forward rate is ¥104 per $1. A risk-free asset in Japan is currently earning 5 percent. If interest rate parity holds, what rate can you earn on a one-year risk-free U.S. secur..
Which investment(s) should the firm make according to the net present values? Why? Which investment(s) should the firm make to the internal rates of return? Why? If all firms are reinvested at 15 percent, which investment(s) should the firm make? Wou..
Scanlin, Inc., is considering a project that will result in initial aftertax cash savings of $1.88 million at the end of the first year, and these savings will grow at a rate of 3 percent per year indefinitely. What is the maximum initial cost the co..
What do you think are the most important costs and benefits of becoming a publicly traded firm? What questions would you ask before advising whether or not an entrepreneur’s firm should go public?
Which of the statements below describes the IRR decision criterion?
A firm purchases materials on terms of 3/15, net 40 and it can borrow the funds from a bank at an APR of 30%. Should the firm use the bank loan by taking the discount or the full credit period by giving up the discount? Show your work including nomin..
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