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Aguilera Acoustics, Inc., (AAI) projects unit sales for a new seven-octave voice emulation implant as follows: Year Unit Sales 1 109,000 2 128,000 3 116,000 4 99,000 5 85,000 Production of the implants will require $2,300,000 in net working capital to start and additional net working capital investments each year equal to 25 percent of the projected sales increase for the following year. Total fixed costs are $1,370,000 per year, variable production costs are $227 per unit, and the units are priced at $347 each. The equipment needed to begin production has an installed cost of $24,000,000. Because the implants are intended for professional singers, this equipment is considered industrial machinery and thus qualifies as seven-year MACRS (MACRS Table) property. In five years, this equipment can be sold for about 20 percent of its acquisition cost. AAI is in the 40 percent marginal tax bracket and has a required return on all its projects of 16 percent. Required: What are operating cash flows, change in net working capital, capital spending, and total cash flow for each year of the project? What is the NPV of the project? What is the IRR?
Dog Up! Franks is looking at a new sausage system with an installed cost of $455,000. This cost will be depreciated straight-line to zero over the project’s five-year life, at the end of which the sausage system can be scrapped for $65,000. If the ta..
The closed-loop gain of a negative-feedback amplifier is Af = -80 and the open-loop gain is A = -105. - Find the feedback transfer function β.
The company's marginal tax rate is 40 percent.- Calculate the company's weighted cost of capital for the coming year.
Assuming IBM’s historical “LT (Long-term Debt/Equity) is 100 percent, how does it currently stand? Generally speaking, is that good or bad? Assuming its historical return on assets is 10 percent, how does it currently stand? Generally speaking, is th..
Herbert Engineering is issuing new 15-year bonds that have warrants attached. If not for the attached warrants, the bonds would carry a 9% annual interest rate. However, with the warrants attached the bonds will pay a 6% annual coupon. There are 30 w..
Suppose FRM, Inc. issued a zero-coupon, equity index-linked note with a five-year maturity.- Calculate the cash flow at maturity assuming the equity index appreciates by 30% over this five-year period.
Two 150-horsepower (HP) motors are being considered for installation at a municipal sewage-treatment plant. The first costs $4,500 and has an operating efficiency of 83%. The second costs $3,600 and has an efficiency of 80%. Both motors are projected..
Friendly’s Quick Loans, Inc., offers you $6.50 today but you must repay $8.35 when you get your pay check in one week (or else). What is the effective annual return Friendly’s earns on this lending business?
When this position was closed out, the quoted price was 93.60. Determine the profit or loss per contract, ignoring transaction costs.
The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer would not change revenues, but it is expected to save the firm $544,450.00 per year in before-tax operating costs, mainly labor. Campbell's margina..
You own a portfolio that is 26 percent invested in Stock X, 41 percent in Stock Y, and 33 percent in Stock Z. The expected returns on these three stocks are 11 percent, 14 percent, and 16 percent, respectively. What is the expected return on the port..
Maxwell Communications paid a dividend of $1.20 last year. Over the next 12 months, the dividend is expected to grow at 15 percent, which is the constant growth rate for the firm (g). The new dividend after 12 months will represent D1. The required r..
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