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1.Using the assumptions in part a of Problem 5 (assuming there is no cannibalization),
a. Calculate HomeNet’s net working capital requirements (that is, reproduce Table 7.4 under the assumptions in Problem 5(a)).
b. Calculate HomeNet’s FCF (that is, reproduce Table 7.3 under the same assumptions as in (a)).
2.A bicycle manufacturer currently produces 300,000 units a year and expects output levels to remain steady in the future. It buys chains from an outside supplier at a price of $2 a chain. The plant manager believes that it would be cheaper to make these chains rather than buy them. Direct in-house production costs are estimated to be only $1.50 per chain. The necessary machinery would cost $250,000 and would be obsolete after 10 years. This investment could be depreciated to zero for tax purposes using a 10-year straight-line depreciation schedule. The plant manager estimates that the operation would require additional working capital of $50,000 but argues that this sum can be ignored since it is recoverable at the end of the 10 years. Expected proceeds from scrapping the machinery after 10 years are $20,000.
If the company pays tax at a rate of 35% and the opportunity cost of capital is 15%, what is the net present value of the decision to produce the chains in-house instead of purchasing them from the supplier?
The firm also has a total of $10,000,000 (par value) is debt outstanding. The debt is in the form of bonds with 10 years left to maturity. They pay semi-annual coupons at a coupon rate of 12% Currently, the bonds sell at %110 of par value.
CPX Corporation just paid a dividend of $1 each share. Analysts expect the company's dividend to increase 10 percent this year and 8 percent the next year.
Show the impact of this information on the taxable income of Otter, Ellie, and Linda if Otter is
many benefits known as riders can be added on to life insurance policies. some are added at no cost to the insured and
Suppose that Interest Rate Parity holds. The spot rate for Euro is $1.20 and the one year forward rate is $1.23. Find out the annual rate of interest on deposits in United States?
The Rivoli Corporation has no debt outstanding, and its financial position is given by the following information: The firm is planning selling bonds and simultaneously repurchasing some of its stock.
How is financial leverage created? Describe how the degree of financial leverage is calculated.
Tunney Industries can issue perpetual preferred stock at a price of $52.50 a share. The stock would pay a constant annual dividend of $5.50 a share. What is the company's cost of preferred stock, rp? Round your answer to two decimal places.
Evaluate the annual increases in required net working capital and capital expenditures (CAPEX) for SoftTec for the years 2011 to 2015 and estimate SoftTec's terminal value cash flow at the end of 2014.
Compute the strategic profit model ratios under the assumption that first year sales are $ 700,000.00, net profit is $ 66,000.00, the total investment in assets is $ 400,000.00.
Find out the expected return for Benson Industries. Find out the average cash conversion cycle for Jolly Roger Company.
A bank has a vault cash value of $1 million and $5 million in deposits held at its federal reserve sidtrict bank at 8% federal reserve ratio what dollar amount of deposits can the bank have?
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