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The HTT Company is considering a new product. The new product has a five-year life. Sales and net income after taxes for the new product are estimated in the following table:
The equipment to produce the new product costs $500,000. The $500,000 would be borrowed at a risk-free interest rate of 14 percent. However, the machine adds only $300,000 to the firm's debt capacity in years 1, 2, and 3, and only $200,000 in years 4 and 5. Although net income includes the depreciation deduction, it does not include the interest deduction (that is, it assumes that the equipment is financed with equity). The equipment can be depreciated on a straight-line basis over a five-year life at $100,000 per year. The equipment is expected to be sold for $100,000 in five years. Net working capital (NWC) required to support the new product is estimated to be equal to 10 percent of net sales of the new product. The NWC will be needed at the start of the year. This means that if sales were $1 in year 1, the NWC needed to support this one dollar of sales would be committed at the beginning of year 1. The company's discount rate for the unlevered cash flows associated with this new product is 18 percent and the tax rate is 40 percent. What is the net present value of this project?
Net earnings before deducting minority share of earnings is utilized in the following ratios, since noncontrolling interests are included in the base. Which ratio is an exception to this statement?
What are primary and secondary markets? What is the difference between a primary market and a secondary market? Your response should be at least 200 words in length.
During the year Lightco returns 10 percent, shineco returns 12 percent, and brightco loses 5 percent. What was the return on his portfolio?
The ratio analysis indicates that ACME has increased their profits and decreased their liabilities from 2003 to 2004. ACME has also increased their ability to cover interest payments and increased their return on assets.
What is a will? Why is a will important? What happens if a person dies without a will?- List the requirements for a valid will.
If the lathe can be sold for $4,800 at the end of year 3, what is the after-tax salvage value?
how many payments will he need to make to pay off the loan and how do I evaluate this when my answers are in quarters?
Select a company to research with regard to significant financial reporting and analysis issues. You should select an organisation for which financial information is readily available and address the following issues.
Suppose today s stock price of Book.com is $100. With probability 60% the price will rise to $130 in one year and with probability 40% it will fall to $80 in one year.
Computation of expected returns and variances and covariance of stocks and Choose your own risk aversion coefficient
The bonds have a par value of $1,000, a current price of $930, and will mature in 20 years. What would the annual yield to maturity be on the bond if you purchased the bond today?
What is the stock price today assuming a required return of 12 percent on this stock?
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