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McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $740 per set and have a variable cost of $410 per set. The company has spent $189,000 for a marketing study that determined the company will sell 38,000 sets per year for seven years. The marketing study also determined that the company will lose sales of 8,000 sets of its high-priced clubs. The high-priced clubs sell at $1,290 and have variable costs of $720. The company will also increase sales of its cheap clubs by 8,000 sets. The cheap clubs sell for $480 and have variable costs of $120 per set. The fixed costs each year will be $7,560,000. The company has also spent $983,000 on research and development for the new clubs. The plant and equipment required will cost $21,000,000 and will be depreciated on a straight-line basis. The new clubs will also require an increase in net working capital of $914,000 that will be returned at the end of the project. The tax rate is 34 percent, and the cost of capital is 14 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 following are three one year "discount" loans that a bank might offer to the customer. Determine the amount of interest the bank would make on each loan and indicate the amont of net proceeds that the bank would pay our on each loan. On which loa..
Times of changing inventory prices (both inflation and deflation) how can the choice of the inventory costing method impact reported profits?
A share of preferred stock costs $75.00 and the next dividend is to be paid in 1 year. The expected annual return on this stock is 15%. In excel, compute and graph the dividend growth rate, as implied by expected dividend amounts (to be paid one year..
What is the current yield offered by each preferred stock? Why are the prices of these preferred stocks different even though they both pay the same dividend?
Create the statement of sources and uses of cash from the following entries:
A fast growing firm recently paid a dividend of $0.15 per share. The dividend is expected to increase at a 26 percent rate for the next four years. Afterwards, a more stable 11.5 percent growth rate can be assumed. If a 14.0 percent discount rate is ..
Quick Computing installed its previous generation of computer chip manufacturing equipment 3 years ago. Some of that older equipment will become unnecessary when the company goes into production of its new product. What is the after-tax cash flow fro..
The High Growth Company's last dividend was $1.50. The dividend growth rate is expected to be constant at 30% for 3 years, after which dividends are expected to grow at a rate of 6% forever. If High Growth's required return is 13% what is the company..
A company’s preferred stock is issued it $25 with promised evidence of 3% of four. Current price of the stock is $61. What is the expected rate of return?
Consider an asset that costs $576,000 and is depreciated straight-line to zero over its eight-year tax life. The asset is to be used in a five-year project; at the end of the project, the asset can be sold for $167,000. If the relevant tax rate is 35..
Corporations often use different costs of capital for different operating divisions. Using an example, calculate the weighted cost of capital (WACC). What are some potential issues in using varying techniques for cost of capital for different divisio..
The firm manufactures a global positioning system (GPS) that sells for $2,000, with cost of goods sold (hardware 30% and software 70%) of 55% of sales. What is the new cost of goods sold percent of sales for each of the countries
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