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Consider a project to supply 106 million postage stamps per year to the U.S. Postal Service for the next five years. You have an idle parcel of land available that cost $1,960,000 five years ago; if the land were sold today, it would net you $2,160,000 aftertax. The land can be sold for $2,360,000 after taxes in five years. You will need to install $5.46 million in new manufacturing plant and equipment to actually produce the stamps; this plant and equipment will be depreciated straight-line to zero over the project’s five-year life. The equipment can be sold for $560,000 at the end of the project. You will also need $660,000 in initial net working capital for the project, and an additional investment of $56,000 in every year thereafter. Your production costs are .56 cents per stamp, and you have fixed costs of $1,080,000 per year. If your tax rate is 34 percent and your required return on this project is 12 percent, what bid price should you submit on the contract? (Do not round intermediate calculations and round your answer to 5 decimal places, e.g., 32.16161.)
Ward Corp. is expected to have an EBIT of $1,950,000 next year. Depreciation, the increase in net working capital, and capital spending are expected to be $166,000, $87,000, and $116,000, respectively. All are expected to grow at 15 percent per year ..
The firm has a 75% chance if it invests -$1,500 a return of $500 for 7-years, and a 25% chance of returning $25 for 7-years. Based on the above data, what is the project's net present value? $1,312,456 -$1,104,607 -$875,203 $105,999 $321,788
If you observe news reports about financial markets for some time, you will notice that investors pay a tremendous amount of attention to economic data releases from thee government. Why do you think this is the case? What are investors concerned abo..
Fabrizio, Inc. is expected to generate earnings of $1.50 per share this year. If the mean ratio of share price to expected earnings of competitors in the same industry is 20, then the stock price per share is $____. If the standard deviation of a sto..
research and analyze the global equity and bond markets to create an faq sheet that could be given to prospective
Trust Bankers just paid an annual dividend of $1.5 per share. The expected dividend growth rate is 6.7 percent, the discount rate is 11 percent, and the dividends will last for 10 more years. What is the value of the stock?
What interest rate would make it worthwhile to incur a compensating balance of $28,000 in order to get a 1 percent lower interest rate on a 1 year, pure discount loan of $315,000?
Suppose an American call option is in the money, so S > X. Demonstrate that the market price of this call (C) cannot be less than the difference between the stock price and the exercise price. That is, explain why this must be true: C ≥ S - X.
In perfect capital markets, how does leverage affect the cost of equity? a. In perfect capital markets, levered equity's cost increases with the debt-equity ratio. b. In perfect capital markets, leverage increases the cost of levered equity by the co..
Lexington Manufacturing, Inc. (Lexington) is negotiating for the purchase of a new piece of equipment for its current operations. Lexington has received an offer which specifies that the equipment could be purchased for $80,000. The new equipment wil..
Inflation is expected to be 3 percent over the next year. You desire an annual real rate of return of 2.5 percent on your investments. What nominal rate of interest would have to be offered on a one-year Treasury security for you to consider making a..
Another three months have passed. You are now ready to expand to your sister city and you need more capital. You decide the wisest path is to sell some stock to outside investors, but you will maintain control over your company by holding onto the ma..
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