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BMI corporation is evaluating relevant cash flows for a new machine. The projects initial investment is $30,000.00. It is expected to last for three years and expected to generate an annual revenue of 16,000, annual cash expenses of $8,000. The investment will be depreciated using straight line method. The machine is expected to be sold at the end of three years for $5,000. For the purpose of net working capital needs, it is expected to budget 10% of revenue as cash balance. all of these balances would be needed at the beginning of each year and are estimated from the year-end annual estimates of revenues and cash expenses given above. The tax rate is 25% and the cost of capital is 9%.
What is the cash flow for at year 0,1,2,3?
If the cost of capital is 10%, is it a good investment ?
A semi annual coupon bond with face value of $1000 has a coupon rate of 8% and matures in 12 years. The market-determined discount rate on this bond is 9%. What is the price of the bond? Round to the penny. What is the coupon rate of a bond with a fa..
Find the present values of these ordinary annuities. Discounting occurs once a year. Rework previous parts assuming that they are annuities due.
ABC international has the following summarised statement of financial position at 31 December 20X1: Non-current assets 2000, inventories 300, receivables 500, cash 200, payables 1000. What cash balance in one year’s time would this imply if the non-c..
Mickey’s Boats will produce a new line of speed boats. It has a choice of larger production facility with a less laborers or smaller production facility with more laborers. Calculate the number of speed boats for which the accounting operating profit..
Lourdes Corporation's 11% coupon rate, semiannual payment, $1,000 par value bonds, which mature in 10 years, are callable 3 years from today at $1,050. They sell at a price of $1,159.36, and the yield curve is flat. Assume that interest rates are exp..
A company sells 500 shirts at $15 each with a cost of goods sold of $2 per shirt. The company has selling and administrative expenses of $2500, depreciation expenses of $500, interest expenses of $1000, and a tax rate of 35%. Calculate the EBT (earni..
You have just purchased an investment that generates the following cash flows for the next four years. You are able to reinvest these cash flows at 7.9 percent, compounded annually. What is the present value of this investment if 7.9 percent per year..
Big Rapids Homes has a bond issue outstanding that pays $60 annual coupon paid semi-annually and matures in 30 years. The bonds have a par value of $1,000 and a quoted market price of 95.5. What is the yield to maturity?
Explain how financial ratio analysis of a firm’s projected cash flow budget could be efficiently used by its managers for financial planning.
Suppose a semi-annual coupon bond has coupon rate of 3.5%, maturity of 10-years and price per $100 of face value equal to 106. What can you say about the relationship between the yield to maturity and the coupon rate?
Fama's Llamas has a weighted average cost of capital of 10 percent. The company's cost of equity is 15 percent, and its pretax cost of debt is 9 percent. The tax rate is 37 percent. What is the company's target debt-equity ratio?
Mercier's is analyzing a proposed 3-year project using standard sensitivity analysis. The company expects to sell 12,000 units, ±4 percent. The expected variable cost per unit is $7 and the expected fixed costs are $36,000. The discount rate is 11 pe..
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