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A well known university in Maryland works on a new LMS system, The management anticipates that new system will have the first year revenues of $400,000 with subsequent annual growth of 5%. Operating costs are 30% of revenues. The project requires investment in new equipment, which will have a five year anticipated life and will be depreciated using MACRS depreciation method toward a zero book value (MACRS depreciation rates are given below). However, the company will be able to sell the equipment on the after-market at the end of year 5 for 20% of its original cost. The company requires a 10% rate of return from its investment and faces a 38% tax rate (overall the company is profitable). In addition to capital investment, the project requires an outlay of net working capital equal to 10% of revenues in the coming year. I.e., at time 0 (beginning of year 1) net working capital requirement is $25,000 and will grow in subsequent years. All NWC will be recovered after the project's end. a) Calculate the NPV and IRR for the project. Should the company undertake the project? (see chapter 2 for details) b) The manager raised some concerns about costs, first year revenues and revenue growth projections. Considering one factor at a time, at what level of operating costs, initial revenues, and revenues growth the project will break-even (NPV=0)? (see chapter 3 for details) c) Looking at percentage difference between the predicted level and critical (break-even) level of each of the three factors, which of them is the most critical? (see chapter 3 for details)
Sweet Tooth Bakery bakes and sells pies. Sweet Tooth has annual fixed costs of $880,000 and a variable cost per pie of $7.50. Each pie sells for $15.50 each. The firm expects to sell 500,000 pies annually. What is the break-even point in pies?
advertising technologies inc. ati specializes in providing both published and online advertising services for the
ecology labs inc. will pay a dividend of 6.40 per share in the next 12 months d1. the required rate of return ke is 14
Linda Anderson earned a 10 percent interest in the capital of Doty Associates, a partnership, for services rendered. Doty's net assets at July 1 had a basis of $70,000 and a fair market value of $100,000.
Ninja Co. issued 15-year bonds a year ago at a coupon rate of 8.1 percent. The bonds make semiannual payments. If the YTM on these bonds is 6.4 percent, what is the current bond price?
Draw the tree indicating the price of an American call option at each node. Indicate the nodes where it is optimal to excercise the option early.
1.What is correlation and when would a researcher be interested in determining the correlation among two or more variables?
What has happened to the real value of the yuan over the past year? Has it gone up or down? A little or a lot? What are the likely effects of the change in the yuan's real value on the dollar profits of a company like Procter & Gamble that sells al..
An investment project has annual cash inflows of $5,000, $5,500, $6,000, & $7,000. and a discount rate of 14 %. What is the discounted payback period for these cash flows if the initial cost is $8,000? What if the initial cost is $12,000? What if ..
Estimate a qualified plan in which the annual contribution is a percentage of each participant's compensation.
an individual has 45000 invested in a stock with a beta of 0.8 and another 75000 invested in a stock with a beta of
Use 2 transactions in recent financial news to illustrate and explain the roles of financial intermediaries, and banks in particular, in these transactions.Furthermore, explain how these transactions would occur without a financial intermediary.
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