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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 $360 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 $205 per unit and fixed costs are $100,000 per year. The project requires an initial investment of $153,000 in assets, which will be depreciated straight-line to zero over the 3-year project life. The actual market value of these assets at the end of year 3 is expected to be $31,000. 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 39 percent and the required return on the project is 12 percent.
What will the cash flows for this project be?
Mother and daughter enterprises is a relatively new firm that appears to be on the road to great success. The company paid their first annual dividend yesterday in the amount of $.28 a share.
It is now January 1. You plan to make a total of 5 deposits of $600 each, one every 6 months, with the first payment being made today. The bank pays a nominal interest rate of 10% but uses semiannual compounding.
A firm has been losing sales due to technological obsolescence. It projects growth for the future to be -2%. Its recent divided was $2.00. What is the value of this stock when the required return is 9%
You are serving on a jury. A plaintiff is suing the city for injuries sustained after a freak street sweeper accident. In the trial, doctors testified that it will be five years before the plaintiff is able to return to work.
Assume the economy consisted of three types of people. 50% are fad followers, 45% are passive investors (they have read this book and so hold the market portfolio), and 5% are informed traders.
Blue Water Systems is analyzing a project with the following cash flows. Should this project be accepted based on the discounting approach to the modified internal rate of return if the discount rate is 14 percent
The development costs are $850,000 immediately and another $850,000 at the end of two years. When the game is released, it is expected to make $1.2 million per year for years 3, 4, and 5.
Metasteel Limited Co. has a stable sales track record but does not expect to grow in the next several years. Its last annual dividend was $5.75. If the required rate of return on similar investments is 18 percent
Why does a rise in the level of interest rates adversely affect the market value of both assets and leabilities
The company has one bond issue outstanding that matures in 23 years and has an 7.4 percent coupon rate. The bond currently sells for $970. The corporate tax rate is 28 percent.
Yare hired as a financial planner. work out an amortization schedule for a nine-year loan of $90,000 which requires equal annual payments. The interest rate is 4.5% per year.
Beckman Engineering and Associates (BEA) is considering a change in its capital structure. BEA currently has $20 million in debt carrying a rate of 7%, and its stock price is $40 per share with 2 million shares outstanding.
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