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In early 2008, Doc and Lyn McGee formed the McGee Cake Company. The company produced a full line of cakes, and its specialties included cheese cake, lemon pound cake, and double-iced, double-chocolate cake. The couple formed the company as an outside interest, and both continued to work at their current jobs. Doc did all the baking, and Lyn handled the marketing and distribution. With good product quality and a sound marketing plan, the company grew rapidly. In early 2013, the company was featured in a widely distributed entrepreneurial magazine. Later that year, the company was featured in Gourmet Desserts, a leading specialty food magazine. After the article appeared in Gourmet Desserts, sales exploded, and the company began receiving orders from all over the world. Because of the increased sales, Doc left his other job, followed shortly by Lyn. The company hired additional workers to meet demand. Unfortunately, the fast growth experienced by the company led to cash flow and capacity problems. The company is currently producing as many cakes as possible with the assets it owns, but demand for its cakes is still growing. Further, the company has been approached by a national supermarket chain with a proposal to put four of its cakes in all of the chain's stores, and a national restaurant chain has contacted the company about selling McGee cakes in its restaurants. The restaurant would sell the cakes without a brand name.
Ultimately, what action would you recommend the company undertake? Why?
A 7-yr annuity of fourteeen $10,600 semi-annual payments will begin 9 years from now, with the first payment coming 9.5 years from now. If the discount rate is 9 percent compounded monthly, what is the value of this annuity five years from now? If th..
Anne sold her home for $290,000 in 2015. Selling expenses were $17,400. She purchased it in 2009 for $200,000. During the period of ownership, Anne had done the following: Deducted $50,500 office-in-home expenses, which included $4,500 in depreciatio..
You have $102,000 to invest in a portfolio containing Stock X, Stock Y, and a risk-free asset. You must invest all of your money. Your goal is to create a portfolio that has an expected return of 11 percent and that has only 80 percent of the risk of..
Moerdyk Corporation's bonds have a 10-year maturity, a 6.25% semiannual coupon, and a par value of $1,000. The going interest rate (rd) is 5%, based on semiannual compounding. What is the bond's price?
Financial statements reflect your financial condition. They help you measure where you are now. Then, as time passes and you prepare your financial statements periodically, you can use them to track your progress toward financial goals. Good financia..
What are the YTMs on each bond?- If the YTM changes to 4 percent, what happens to the price of each bond?- What happens if the YTM changes to 6 percent?
Dweller, Inc. is considering a four-year project that has an initial after-tax outlay or after-tax cost of $110,000. The future cash inflows from its project are $30,000, $25,000, $50,000 and $40,000 for years 1, 2, 3 and 4, respectively. Dweller use..
A stock has a beta of .80, the expected return on the market is 18 percent, and the risk-free rate is 3.70 percent. What must the expected return on this stock be?
Anna purchased 100 shares of spring, inc. stock of at a price of $54.34 three years ago. She sold all stocks today for $53.35. During the year the stock paid dividends of $3.25 per share. What is Anna's holding period return?
Compounding with Different Interest Rates A deposit of $390 earns interest rates of 7.9 percent in the first year and 10.9 percent in the second year. What would be the second year future value?
Kolby Corp. is comparing two different capital structures. Plan I would result in 15,000 shares of stock and $100,000 in debt. Plan II would result in 11,500 shares of stock and $170,000 in debt. what are the break-even levels of EBIT for each plan a..
The Wheel Deal Inc., a company that produces scooters and other wheeled non-motorized recreational equipment is considering an expansion of their product line to Europe. What are the annual after-tax cash flows for the Wheel Deal project?
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