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Your company has been doing well, reaching $1 million in annual earnings, and is considering launching anew product. Designing the new product has already cost $500,000. The company estimates that it will sell800,000 units per year for $3 per unit with fixed costs of $300,000 per year and variable costs of $2 per unit.Production will end after year 5. New equipment costing $2 million will be required. The equipment will bedepreciated using the 7-year MACRS schedule. You expect to be able to sell the equipment for $200,000 atthe end of year 5. Your current level of working capital is $300,000. The new product will require the workingcapital to increase to a level of $380,000 immediately. Then working capital requirements will be $400,000in year 1, $420,000 in year 2, $450,000 in year 3, $390,000 in year 4, and finally returning to $300,000 atthen end of the project. Your tax rate is 35%. The discount rate for this project is 10%.Do the capital budgeting analysis for this project and calculate its NPV and IRR.
A firm announces its intent to undertake a levered recapitalization, issuing debt to repurchase a fraction of the outstanding common stock. Upon the announcement, its stock
Evaluate the following two cash flow streams using the PP, ROI, NPV, and IRR. Assume a MARR of 8%. Plot a graph showing the relationship between the interest rate and the NP
What are the differences between managing an international company and managing a domestic company? What functions of management are different in an international company as c
Elizabeth Burke has asked you to do some preliminary analysis of the data in the Performance Lawn Equipment database. First, she would like you to edit the worksheets Dealer
The spot rate for British Pounds (GBP) into Swiss Francs (CHF) is 1.4966 CHF/GBP. The 3-month forward point is quoted as -28. What is the 3-month forward rate? Are interest ra
Alpha Industries is considering acquiring Foxtrot Flooring. Foxtrot is worth $20 million to its current owners under its existing operational methods. Due to some opportunit
The next expected annual dividend for Sun, Inc., will be $1.20 per share, and analysts expect the dividend to grow at an annual rate of 7 percent indefinitely. If Sun stock
A proposed new investment has a projected sales of 750000. Variable costs are 55 percent of sales, and fixed costs are 164000; depreciation is 65000. prepare a pro forma
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