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GBK, Inc. is considering a new product. The proposal is as follows:Project cost: $2,000,000Project life: 5 yrsSalvage value: zeroDepreciation: straight line to zeroSales projection: 180 units per yearPrice per unit: $20,000Variable cost per unit will be: $12,400Fixed costs per year: $490,000Required return on the project: 10%Relevant tax rate: 35%Based on our past experience, the unit sales, variable costs and fixed cost projections are probably accurate to within plus or minus 10%A] What are the upper and lower bounds for these projections?B] What is the base case NPV?C] What are the best case and the worst case scenarios?D] Evaluate the sensitivity of your base-case NPV to changes in fixed costs.E] What is the cash break-even level of output for this project (ignoring taxes)?F] What is the accounting break-even level of output for this project? What is the degree of operating leverage at the accounting break-even point? How do you interpret this number?
When is insurance beneficial? Is Insurance ever not beneficial? Explain your answer. Why is the portfolio approach an effective tool to manage risk? Explain your answer.
Fern has preferred stock selling for 95 percent of par that pays an 8 percent annual coupon. What would be Fern's component cost of preferred stock?
A company faces financial pressures from attempting to increase too rapidly. Which of the following ratios would you expect to be impacted the most by these pressures?
If the risk-free rate is 3.8 percent, and the average market risk premium is 5.5 percent, what is the estimated cost of existing equity for Mark Inc.?
A ski resort plans to eventually add 5-new chairlifts. One lift costs $2 million, making slope costs another $1.3 million. The lift allows 300 additional skiers, but there are only forty days a year when the extra capacity will be required.
Describe Current degree of financial leverage and McFrugal's tax rate is 40% and The firm also has outstanding 1 million shares of common stock
Which ground modification methods may be used to address this problem, and which methods are appropriate for stabilizing this type of soil?
The Thompson Company projects an increase in sales from $18 million to $25 million, but it needs an additional $500,000 of current assets to support this expansion.
Your client's federal marginal tax rate is 36 percent and marginal state rate is 7 percent. The client doesn't itemize deductions on his federal tax return and is considering investing in a municipal bond issue in his state of residence that yields 5..
Examine and evaluate the disparity of your state's budget allocation for education and property tax to the various localities.
Describe the mechanics of various types of merger arbitrage, I.e., Cash Deals, Stock Mergers, and complex merger transactions (cash, and various types of stock exchanges).
A stock is not expected to pay a dividend over the next four years. Five years from now the company anticipates that it will establish a dividend of $1 a share.
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