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You are evaluating a project for The Ultimate recreational tennis racket, guaranteed to correct that wimpy backhand. You estimate the sales price of The Ultimate to be $500 per unit and sales volume to be 1,000 units in year 1; 1,250 units in year 2; and 1,325 units in year 3. The project has a 3-year life. Variable costs amount to $275 per unit and fixed costs are $100,000 per year.
The project requires an initial investment of $195,000 in assets, which will be depreciated on a straight-line basis with a life of 3 years. The actual market value of these assets at the end of year 3 is expected to be $45,000.
NWC requirements at the beginning of each year will be approximately 20 percent of the projected sales during the coming year. The tax rate is 35 percent and the required return on the project is 11 percent. (Use SL depreciation table)
What will the cash flows for this project be?
The Florida lottery agrees to pay the winner $289,000 at the end of each year for the next 20 years. What is the future value of this prize if each payment is put in an account earning 0.10?
Little Books Inc. recently reported $13 million of net income. Its EBIT was $32.5 million, and its tax rate was 35%. What was its interest expense? [Hint: Write out the headings for an income statement and then fill in the known values. Then divide $..
Carry-ALL plans to sell 1,300 carriers next year and has budgeted sales of $46,000 and profits of $22,000. Variable costs are projected to be $20 per unit. Michael Co. offers to pay $23,800 to buy 520 units from Carry-ALL. Total fixed costs are $7,00..
Using the information below -- what was Bala Industries’ Cash Flow from Financing for the year ending 6/30/2011?
Calculating NAV (LO2, CFA2) The Emerging Growth and Equity Fund is a"low-load" fund. The current offer price quotation for this mutual fund is $15,95 and the front- end load is 2.0 percent. what is the NAV? if there are 19.2 million shares outstandin..
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2000 is deposited into a newly opened fund on January 1, 1999. Another deposit is made into the fund on July, 1 1999. On January 1, 2000, the balance in the fund is 6000. The time-weighted rate of return in 1999 is 8.0% and the dollar-weighted rate o..
Thomas Kratzer is the purchasing manager for the headquarters of a large insurance company chain with a central inventory operation. Thomas's fastest-moving inventory item has a demand of 6,050 units per year. What is the optimal number of orders per..
TexMex Food Company is considering a new salsa whose data are shown below. The equipment to be used would be depreciated by the straight-line method over its 3-year life and would have a zero salvage value, and no change in net operating working capi..
The cost of an item if the full amount had been paid at the time of sale is called the:
Explain the relationship observed between the required rate of return, growth rate and the dividend paid, and the estimated value of the stock using the Gordon Model. Explain the value and weaknesses of the Gordon model
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