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A project is financed by Equity and Debt. The cost of cost of equity is 10%.; the cost of equity is 10%. The market value of the debt is $250,000 and there are 250,000 shares trading at $1 each. Assume that there are no taxes. The project is depreciated straight-line to a book value of zero over the life of the project. The equipment will have no salvage value. Annual fixed costs are $50,000. The contribution margin is $12.5. The project has a 5-year life. What is the cash, accounting, and financial break-even quantity?
A consumer product firm finds that its brand of laundry detergent is losing market share, so it decides it needs to “freshen” the product. One strategy is to maintain the current detergent formula but to repackage the product. Calculate the payback, ..
Consider a four-month put futures option with a strike price of 50 when the risk-free interest rate is 10% per annum. The current futures price is 47.- What is a lower bound for the value of the futures option.
What sales volume would be required in order to meet the minimum profit goal?
You are evaluating a growing perpetuity product from a large financial services firm. The product promises an initial payment of $24,000 at the end of this year and subsequent payments that will thereafter grow at a rate of 0.03 annually. If you use ..
A company's perpetual preferred stock currently sells for $92.50 per share, and it pays an $8.00 annual dividend. If the company were to sell a new preferred issue, it would incur a flotation cost of 5.00% of the issue price. What is the firm's cost ..
Pierre receives a thirty-year annuity paying $200(1.03)^t + $100(1.02)^2t + $80t − $60 at the beginning of the t-th year. Find the value of this annuity at the end of the tenth year if the annual effective interest rate remains 4% during the thirty y..
Susan will start attending college in September 2024 at which time she will need $12,000 for the first year of study. Her costs at college for the next three years are estimated at $14,000, $16,000, and $18,000, respectively. What is the size of the ..
Consider the following information for three stocks, Stocks X,Y, and Z. The returns on the three stocks are positively correlated but are not perfectly correlated. Stock Expected Return Standard Deviation Beta. Fund Q has one-third of its funds inves..
An investor purchases a mutual fund for $80. What is the net rate of return from this investment?
Grunewald Industries sells on terms of 2/10, net 30. Gross sales last year were $4,370,000, and accounts receivable averaged $462,000. Half of Grunewald's customers paid on the 10th day and took discounts. What are the nominal and effective costs of ..
For SKU A3510 at the Hardware Warehouse, the order quantity has been set at 150 units each time an order is placed. The daily demand is normally distributed, with a mean of 12 units and a standard deviation of 4. It always takes exactly 5 days for an..
Consider $1000 par value bond with a 7 percent annual coupon. The bond pays interest annually. There are 9 years remaining until maturity. What is the current yield on the bond assuming that the required return on the bond is 10 percent?
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