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McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $900 per set and have a variable cost of $500 per set. The company has spent $159, 000 for a marketing study that determined the company will sell 55, 000 sets per year for seven years. The marketing study also determined that the company will lose sales of 11, 000 sets of its high-priced clubs. The high-priced clubs sell at $1, 190 and have variable costs of S790. The company will also increase sales of its cheap clubs by 11, 500 sets. The cheap clubs sell for $530 and have variable costs of $275 per set. The fixed costs each year will be $9, 190, 000. The company has also spent $1, 200, 000 on research and development for the new clubs. The plant and equipment required will cost $29, 330, 000 and will be depreciated on a straight-line basis. The new clubs will also require an increase in net working capital of $1, 390, 000 that will be returned at the end of the project. The tax rate is 40 percent, and the cost of capital is 12 percent. Suppose you feel that the values are accurate to within only plusminus 10 percent. What are the best-case and worst-case NPVs? (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
The purchase price and value of a home are $200,000. A borrower secures an 80% LTV, 30 year ARM with an initial interest rate of 4% to finance the purchase. Mortgage terms call for annual interest rate adjustments. What is the monthly payment for the..
Keiper, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2.7 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be worth..
Atlantis Fisheries issues zero coupon bonds on the market at a price of $529 per bond. Each bond has a face value of $1,000 payable at maturity in 16 years. It is callable in 8 years at a call price of $650. Using semi annual compounding, what is the..
What is it like to work at Google? (Hint: Go to Google's website and click on "About Google'. Find the section on jobs at Google and go from there.) What is your assessment of the company's work environment?
Please calculation the Present value and cash payment reduction. Company B agrees to pay Company A $200,000 at the end of each of the next 5 years, with discount rate 7%.
Graham Bell has just retired after 30 years with the telephone company. His total pension funds have an accumulated value of $400,000, and his life expectancy is 16 more years. His pension fund manager assumes he can earn a 10 percent return on his a..
What is the incremental value to shareholders of the cost savings (synergies) projected in this merger? How will the value of synergies be shared in the proposed transaction? (Tax:40%, Discouunt Rate:11%, Year 4 cost saving: 350B, after year 5: perpe..
Teddy Corp is considering acquiring Daniels Company. Daniels has a capital structure consisting of $5 million (market value) in 11% bonds and $10 million (market value) of common stock. Calculate the current WACC for the Daniels Company. Calculate th..
Consider the following financial statement information for the Ayala Corporation: Item Beginning Ending Inventory $ 10,400 $ 11,400 Accounts receivable 5,400 5,700 Accounts payable 7,600 8,000 Credit sales $ 84,000 Cost of goods sold 64,000 Calculate..
The CFO of your company (BD-Becton Dickinson and Company) states that the composite cost of capital is saucer-shaped or U-shaped. Explain what this means. Explain the trade-off between retaining internally generated funds and paying the cash dividend..
Moody Industrial Supply is considering a perpetual project that will produce annual cash revenues of $382,000. The annual cash costs are $313,000 and the initial investment is $350,000. The firm is an all-equity firm with a tax rate of 35 percent and..
Hooper Printing Inc. has bonds outstanding with 19 years left to maturity. The bonds have an 7% annual coupon rate and were issued 1 year ago at their par value of $1,000. However, due to changes in interest rates, the bond's market price has fallen ..
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