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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.
Discuss two (2) pros and two (2) cons of a business applying different capital budgeting techniques when it is faced with making wealth-maximizing decisions around investing corporate funds.
[Hedge Equity Portfolio]It is July 16. A company has a portfolio of stocks worth $12 million. The beta of theportfolio is 1.5. The company would like to use the CME December futures contract onthe S&P 500 to change the beta of the portfolio to 1.2 du..
beginning three months from now you want to be able to withdraw 2100 each quarter from your bank account to cover
If the risk-free rate is 8 percent and the market risk premium is 6 percent, what is the certainty equivalent NPV for this project?
The manager notes that only the $21,000 payment of the 27th has cleared the bank. What is the company's ledger balance and available balance with its bank?
what factors should i take into consideration when evaluating a companies capital budgeting decisions based on thier
sea harbor inc. has a marginal tax rate of 35 percent and anaverage tax rate of 22 percent. if the firm earns 79500
A firm has current assets of $36,000, cash of $5,000, current liabilities of $20,000, total assets of $80,000 and total liabilities of $45,000, what is its net working capital?
If the Treasury bill rate (Rf) is 5%, what is the company's cost of capital?
Explain the different methods for the study and practice of retailing.
Based on your collaborative learning team discussion, prepare a 7- to 9-slide Microsoft® PowerPoint®presentation for the senior management team along with a supplemental written report of no more than 1,400 words to present your findings.
suppose that a firms recent earnings per share and dividend per share are 2.80 and 1.90 respectively. both are expected
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