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Last year National Aeronautics had a FA/Sales ratio of 40%, comprised of $250 million of sales and $100 million of fixed assets. However, its fixed assets were used at only 45% of capacity. Now the company is developing its financial forecast for the coming year. As part of that process, the company wants to set its target Fixed Assets/Sales ratio at the level it would have had had it been operating at full capacity. What target FA/Sales ratio should the company set? Select the correct answer. a. 22.8% b. 16.4% c. 19.6% d. 18.0% e. 21.2%
Hekinan Corporation has bought 4000 barrels of Brent crude oil $112.63 a barrel. It has sold call options on 2000 barrels of oil, with exercise price $110, for $5.50 each; and options on 1000 barrels of oil, exercise price $115, for $1.80 each. Calcu..
A project has an initial outlay of $1,964. It has a single payoff at the end of year 7 of $6,219. What is the net present value (NPV) of the project if the company’s cost of capital is 10.89 percent?
RWE Enterprises, Inc. (RWE) is a small manufacturing firm located in the hills just outside Adelaide, South Australia. The firm is engaged in the manufacture and sale of feed supplements used by cattle raisers. Calculate the Payback and discounted Pa..
(Leverage and EPS) You have developed the following pro forma income statement for your corporation. If sales should increase by 25 percent. by what percent would earnings before interest and taxes and net income increase? If sales should decrease by..
Wilson's Furniture is experiencing good growth so has decided to commence paying dividends starting next year. The first dividend will be $0.50 a share with annual increases of 4 percent in the dividend amount. The discount rate is 10 percent. What w..
Mary plans to fund her individual retirement account (IRA) with the maximum contribution of $2,500 at the end of each year for the next 25 years. If Mary can earn 9 percent on her contributions, how much will she have at the end of the twenty-fifth y..
Currently the risk-free rate is 6% and the expected return on the market portfolio is 11%, the expected return for 3 stocks as priced in the market are listed below with their estimate of beta.
X-Tech Company issued preferred stock many years ago. It carries a fixed dividend of $6 per share. With the passage of time, yields have soared from the original 13 percent to 19 percent (yield is the same as required rate of return). What was the or..
Five year ago, you invested in a 5% semi-annual coupon bond with a face value $1,000 for $910. Today, at the date of maturity, the bond issuer announces that default occurs with a renegotiation price $950. If you accept the renegotiation price at the..
We want to retire in 30 years, and we shall need $50,000 income per annum during our retirement which wills last 20 years. We can save $10,000 annually during the first 10 years. We would like to know what the pension fund should be to finance our re..
Microwave Oven Programming, Inc is considering the construction of a new plant. The plant will have an initial cash outlay of $15 million, and will produce cash flows of $5 million at the end of year 1, $6 million at the end of year 2, and $4 million..
Present Value of an Annuity What is the present value of a $2,100 annuity payment over 7 years if interest rates are 11 percent?
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