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Your company has spent $200000 on research to develop a new computer game. The firm is planning to spend $250000 on a machine to produce the new game. The machine has an expected life of three years, a $45 000 estimated resale value, at the end of the third year an falls under MACRS 7-year class life. Revenew from the new game is expected to be $400000 per year with cost of $160000 per year. The firm has a tax rate of 35%, an oportunity cost of capital of 10% and it expects net working capital to increase by $75000 at the beggining of the project.
a. What will the initial cash flow be for this project?
b. What will the operating cash flow for this three year project be? year1 year2 year 3
c. What will the terminal cash flow be?
d. What is the net present value of the project. PV future, PV cost, and NPV
e. What is its profitability index?
Rabie, Inc., has an issue of preferred stock outstanding that pays a $5.30 dividend every year, in perpetuity. Required: If this issue currently sells for $80.25 per share, what is the required return?
If the firm were to increase its leverage from $15 billion to $18 billion and use the cash to repurchase shares, what would you expect its levered equity beta to be?
Rick Rueta purchased a $76,000 home at 7.5% for 30 years with a down payment of $25,000. His annual real estate tax is $1,680 along with an annual insurance premium of $840. Ricks bank requires that his monthly payment include an escrow deposit for t..
What is the annual cost of the wood bridge to the closest dollar?
MVP Inc has produced rodeo supplies for over 20 years. The company currently has a debt-equity ratio of 50% and is in the 40% tax bracket. The required return on the firm’s levered equity is 16%. MVOP is planning to expand its production capacity. Us..
Consider a single business transaction’s impact on the balance sheet. Which of the following could NOT possibly occur as a result of this single transaction? An increase in an asset and a decrease in an asset. A decrease in stockholders' equity and a..
Mary purchased 100 shares of Sweet Pea Co. stock at a price of $43.96 six months ago. She sold all stocks today for $43.36. During that period the stock paid dividends of $2.82 per share. What is Mary’s effective annual rate?
How can investors reduce the risk associated with an investment portfolio without having to accept a lower expected return?
Janicek Corp. is experiencing rapid growth. Dividends are expected to grow at 28 percent per year during the next three years, 18 percent over the following year, and then 5 percent per year indefinitely. The required return on this stock is 11 perce..
Your firm, General Hospital is a not-for-profit, acute care facility which has the following cost structure for its inpatient services. Your job is to determine based on your extensive knowledge of Cost behavior and profit analysis theory and concept..
Blushing Rose invests $1,000 into her Roth IRA. She can increase this investment annually by $1,000 until she reaches the $5,000 annual contribution limit. She will then invest $5,000 per year at the beginning of each year for 30 years. How much will..
To finance a new line of product, the Westchester Company has issued a bond with a par value of $1,000, coupon rate of 8 percent, paid semi-annually and maturity of 30 years. Compute the price of the bond if the required rate of return is 11 percent
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