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A bicycle manufacturer currently produces 291,000 units a year and expects output levels to remain steady in the future. It buys chains from an outside supplier at a price of
2.20 a chain. The plant manager believes that it would be cheaper to make these chains rather than buy them. Direct? in-house production costs are estimated to be only
$1.40 per chain. The necessary machinery would cost $256,000 and would be obsolete after ten years. This investment could be depreciated to zero for tax purposes using a?ten-year straight-line depreciation schedule. The plant manager estimates that the operation would require $49,000 of inventory and other working capital upfront? (year 0), but argues that this sum can be ignored since it is recoverable at the end of the ten years. Expected proceeds from scrapping the machinery after ten years are $19,200.
If the company pays tax at a rate of 35% and the opportunity cost of capital is 15%?, what is the net present value of the decision to produce the chains? in-house instead of purchasing them from the? supplier?
the next dividend payment by xyz co. will be 3 per share. the dividends are anticipated to maintain an 8 percent
Describe what gender, marital status, and race dimensions mean to you as they relate to your experiences in the workplace.
The company has no debt now and has 1 million outstanding shares.Now it wants to issue $40 million riskless debts to repurchase shares with the value of $40 million.How many shares can it repurchase?
The plan calls for you to make six annual payments of $14,000 each, with the first payment occurring today, your child's 12th birthday. Beginning on your child's 18th birthday, the plan will provide $30,000 per year for four years. What return is ..
Identify four financial ratios and state what they tell me about a firm and why it's important to understand what they mean to a bank or an investor.
A project has the following incremental cash flows for years zero through year 5, respectively: -$2,500, $800, $600, $700, $400 and $300. If the firm's cost of capital is 8%, according to the IRR decision rule, should the firm accept or reject t..
Halifax Inc. is considering a project that requires an initial investment of $10 million and promises to generate an annual after-tax cash flow of $1 million perpetually. This firm is only financed by common shares and debt
The company is in the process of issuing $2 million of bonds at par that carry a 5% annual coupon. What is the unlevered value of the firm (in millions)? (Note: You should use MM capital structure model with corporate taxes, but without personal t..
Assume that the overall cost of debt is the weighted average of that implied by the two outstanding debt issues. Both bonds make semiannual payments.
What is the importance of bond ratings?- Discuss the relevance of the different types of yields.- Discuss how use of the concepts, convexity, and duration, can assist investors in the management of their bond portfolios.
Calculate the expected outcome in 1 year assuming the stock of Whole Foods Market (WFM) attains your 1 year price target.
Capital Budgeting. In evaluating the Cayenne, what do you think Porsche needs to assume regarding the substantial profit margins that exist in this market?
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