What is the opportunity cost associated

Assignment Help Financial Management
Reference no: EM131999788

You are considering adding a new software title to those published by your highly successful software company. If you add the new product, it will use capacity on your disk duplicating machines that you had planned on using for your flagship product, “Battlin’ Bobby.” You had planned on using the unused capacity to start selling “BB” on the west coast in two years. You would eventually have had to purchase additional duplicating machines 10 years from today, but using the capacity for your new product will require moving this purchase up to 2 years from today. If the new machines will cost $120,000 and will be depreciated straight-line over a 5-year period to a zero salvage value, your marginal tax rate is 30 percent, and your cost of capital is 14 percent, what is the opportunity cost associated with using the unused capacity for the new product? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.)

Opportunity cost $

Reference no: EM131999788

Questions Cloud

What is the cash stream worth to you in today dollars : What is the cash stream worth to you in today's dollars if your requried rate of return is 5%?
Investigation of free trade : BUSN20016 - RESEARCH IN BUSINESS - CQuniversity Australia - An investigation of free trade agreement between Australia and Japan on Japanese car exporters
Government issuing notes vs. bonds : Is there any difference between the US Government issuing Notes vs. Bonds?
Adverse selection and moral hazard : Many police officer positions require the applicant to have a college degree even though the tasks of a police officer rarely call upon college course material.
What is the opportunity cost associated : what is the opportunity cost associated with using the unused capacity for the new product?
How is the french state handling these changes : From the time of Napoleon I, the French Civil Code placed the family at the center of French society.
How much the consumption of this good will change if : Suppose the income elasticity of demand for good X is 2, its own price elasticity of demand is -4, its advertising elasticity is 3, and the cross-price
What is the present value of the second option : what is the present value? What is the present value of the second option?
Can we predict dummy variables in stata : Can we predict dummy variables in stata? And will the outcome of the prediction also be binary numbers?

Reviews

Write a Review

Financial Management Questions & Answers

  Four-year project to improve its production efficiency

CSM Machine Shop is considering a four-year project to improve its production efficiency. Calculate the Net present value

  The correct opportunity cost for project is determined

The correct opportunity cost for a project is determined to be 15% and the project is expected to generate $1 million in cash flows at the end of the next 4 years after an initial outlay of $3 million. Based on this information, the project would plo..

  Least-expensive car for your new delivery service

You are trying to pick the least-expensive car for your new delivery service. If the business has a cost of capital of 13 percent, calculate the EAC.

  What is yield to maturity on firms bonds

The bonds for Alpha Corp are $1,000 face value with a 5% coupon rate, paid semiannually, and currently trade at $985. The bonds will mature in 8 years. The firm is in 40% tax bracket. You have estimated the market risk premium to be 6% and yield on 1..

  How much capital remains at the end of five years

A loan of 100,000 is payable over five years with monthly payments of 60,000 commencing one month after the inception date. The loan repayment is 2,000 per month and the nominal rate 10 per cent. How much capital remains at the end of five years? If ..

  Contribution to your individual retirement account

You have just made your first $4,000 contribution to your individual retirement account. What will your account be worth when you retire in 45 years?

  Considering purchasing security system costing

PHP inc. is considering purchasing a security system costing $642,000. The equipment will be depreciated as 5-year property under MACRS, which provides for depreciation allowance percentages of 20%, 32%, 19.20%, 11.52%, 11.52%, and 5.76% respectively..

  Decided for your tenants to contribute

You are a landlord and have decided for your tenants to contribute $1,000 a month towards rent payable.

  Importing good valued

If you are importing a good valued $1000 from Japan with an exchange rate of $1=Yen 100, you agreed to pay 100,000 Yen in 90 days. But if Yen is stronger, say, $1=Yen 90, the total Yen you will pay is Yen 100,000/90 Yen/$) = $1,111 that means additio..

  Business and operating decision across many industries

Look at Capital Budgeting as a business and operating decision across many industries.

  Weighted average cost of capital assuming no corporate taxes

A firm has an asset base with a market value of $5.6 million. what is the weighted average cost of capital assuming no corporate taxes?

  Stock have the same expiration date and strike prices

Three put options on a stock have the same expiration date and strike prices of $55, $60, and $65. The market prices are $3, $5, and $8, respectively. Explain how a butterfly spread can be created. Construct a table showing the profit from the strate..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd