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A product line can sell 80.000 products per year for 4 years (after which time this project is expected to shut down). The product will sell for $5 each, with variable costs of $3 for each one produced, while annual fixed costs associated with production will be $70,000. In addition, there will be a $250.000 initial expenditure associated with the purchase of new production equipment. It assumed that this initial expenditure will be depreciated using the SL method down to zero over 4 years .This project will also require a one-time initial investment of $30.000 in net working capital associated with inventory. The required rate of return is 10%. Tax rate is 40%. What are the NPV and IRR? Do you accept the project? why?
Calculate the ABC Corporation’s after-tax IRR from opening the office building under the assumption that it is leased.
Which of the following must result in understated liability balances?
The dividend for Weaver, Inc., is expected to grow at 21 percent for the next 4 years before leveling off at a 5.8 percent rate indefinitely. If the firm just paid a dividend of $1.2 and you require a return of 14 percent on the stock, what is the mo..
A stock is currently priced at $43. The stock will either increase or decrease by 20 percent over the next year. There is a call option on the stock with a strike price of $40 and one year until expiration. If the risk-free rate is 2 percent, what is..
Consider the purchase of a $10,000 capper, a three year asset, in year zero and its sale in year four for $2,000. Show in the table below, the pre-tax cash flow, depreciation, tax savings from depreciation, gains tax, and after tax cash flow with a t..
A hospital organizaiton is applying for a new loand to buy magnetice resonce imaging equipment
Todd O’Hanlon has worked in the management services division of Focus Consultants for the past five years. He currently earns an annual salary of about $120,000. At 33, he’s still a bachelor and has accumulated about $100,000 in savings over the past..
Jesse Corp.'s stock has a Beta of 1.15. The risk-free rate is 6%, and the expected market return is 11%. The firm's cost of common equity, Re, is _____%. Round your final answer to 2 decimal places (example: enter 12.34 for 12.34%), but do not round ..
Suppose you can afford to invest $1000 at the beginning of each month in hopes to save for retirement at the age of 65. For both the annual rates r = 3.2% and r = 8.05%, compounded monthly: Calculate the total future value of the account when you are..
Tanner Inc. reports 2,858,000 stock options granted during fiscal 2014 at a weighted-average fair-value of $15.40. The average vesting period for these options is four years. Tanner should record a $44,013,200 expense on its income statement related ..
Audits of financial statements are designed to determine whether account balances are materially correct. Assume that your client is a manufacturing company that has the following assets on its balance sheet. Describe a substantive audit procedure th..
An analyst believes that a stock for a large company has a beta of 1.4. The 10 year government bond rate is 4%, and the analyst expects the return on the S&P500 to be 12%. Using the capital asset pricing model, the analyst would estimate the required..
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