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The manager of a machine-parts distributor is about to buy an automated telephone ordering system. The manager estimates that each phone call handled by such a system will result in $1.00 more contribution than if the phone call is handled by a sales representative. The company receives 30 calls per hour that could be handled by such a system. The manager has narrowed his search to two possibilities, Telephone System A and Telephone System B. Telephone System A can handle 20 calls per hour and is priced at $50,000. Telephone System B can handle 24 calls per hour. Both telephone systems have the same expected life span, 6,000 hours (which does not include down time). Both Telephone System A and Telephone System B are expected to break down 8 times during their life span. However, the average cost of repairing Telephone System A is $600 whereas the average cost of repairing Telephone System B is $1,000. For this manager, what is the value to the customer of Telephone System B?
Bond portfolios are exposed to interest rate risk and reinvestment risk as described in the text, and it can be immunized against two sources of risk. Please describe how to manage or immunize the risk of a bond portfolio using the concept of DURATIO..
What could Mielewski, Flanigan and Nunez do to create the momentum for changes that aim toward better environmental performance but lack immediate business appeal?
What will the cost of the vehicle be at the end of three years and you want to save a equal amount at the end of each month for the next three years in order to pay cash for the new vehicle.
Suppose Cisco Systems pays no dividends but spent $5.08 billion on share repurchases last year. If Cisco’s equity cost of capital is 12.8%, and if the amount spent on repurchases is expected to grow by 8.9% per year, estimate Cisco’s market capitaliz..
Tolo Co. plans the following repurchases: $9.6 million in one year, nothing in two years, and $20.3 million in three years. After that, it will stop repurchasing and will issue dividends totaling $26 million in four years. The total paid in dividends..
Breakeven point and all forms of leverage TOR most recently sold 100,000 units at $7.50 each; its variable operating costs are $3.00 per unit, and its fixed operating costs are $250,000. Using the EBIT associated with the $750,000 level of sales as a..
The treasurer of a major U.S. firm has $36 million to invest for three months. The interest rate in the United States is .24 percent per month. The interest rate in Great Britain is .30 percent per month. The spot exchange rate is £.635, and the thre..
What are the similarities and differences between options and warrants? What variables are important in determining call option prices?
Consider a 6-month European put on GOOG with a strike price of $650. GOOG spot price is $725 and its volatility is 25%. The stock is not expected to pay any dividend. The risk-free rate is 4%. Use Black-Scholes-Merton (BSM) model to price this put op..
Consider the following information: Rate of Return If State Occurs State of Probability of Economy State of Economy Stock A Stock B Stock C Boom .15 .39 .49 .29 Good .55 .15 .20 .08 Poor .25 −.01 −.09 −.07 Bust .05 −.20 −.24 −.10 a. Your portfolio is..
Hot Foot Shoes would like to maintain its cash account at a minimum level of $40,000, but expects the standard deviation in net daily cash flows to be $5,500, the effective annual rate on marketable securities to be 6.0 percent per year, and the trad..
F.Q Loans Inc. offers "five for four, or I knock on your door." This means you get $4 today and repay $5 when you get your paycheck in 1 week (or else). What is the effective annual return F.Q earns on this lending business? If you were brave enough ..
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