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Consider a project to supply Detroit with 31,000 tons of machine screws annually for automobile production. You will need an initial $1,333,000 investment in threading equipment to get the project started; the project will last for 6 years. The accounting department estimates that annual fixed costs will be $279,000 and that variable costs should be $130 per ton; accounting will depreciate the initial fixed asset investment straight-line to zero over the 6-year project life. It also estimates a salvage value of $299,000 after dismantling costs. The marketing department estimates that the automakers will let the contract at a selling price of $130 per ton. The engineering department estimates you will need an initial net working capital investment of $279,000. You require a 16 percent return and face a marginal tax rate of 36 percent on this project. a. The estimated OCF for this project is $ and the NPV is $. (Do not include the dollar signs ($). Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places. (e.g., 32.16)) b. Suppose you believe that the accounting department's initial cost and salvage value projections are accurate only to within ±15 percent; the marketing department's price estimate is accurate only to within ±11 percent; and the engineering department's net working capital estimate is accurate only to within ±7 percent. Your worst-case NPV for this project is $ and your best-case NPV is $. (Do not include the dollar signs ($). Negative amount should be indicated by a minus sign. Round your answers to 2 decimal places. (e.g., 32.16))
As a firm increases risk of the projects, the debt holders charge higher interest rates. But this implies even a greater incentive to take on more risk, so in some instances creditors may ration credit altogether. If the firm has enough cash to finan..
Blanchford Enterprises is considering a project that has the following cash flow data. What is the project's IRR? Note that a project's projected IRR can be less than the WACC (and even negative), in which case it will be rejected.
You are considering the purchase of Crown Bakery, Inc. common stock that just paid a dividend od $19.59 per share. You expect the dividend to grow at a rate of 1.04 percent per year, indefinitely. You estimate the rate of return od 12.18%, will be ad..
Suppose you have $50,000 to invest. You’re considering Miller-Moore Equine Enterprises (MMEE), which is currently selling for $20 per share. You notice that a put option with a $20 strike is available with a premium of $2.5. Calculate your percentage..
You own a convertible bond that has a 6% yield, 4.5% coupon rate, pays semiannually, and has 3 years to maturity. The conversion rate is 8. The current stock price is 127.3. Calculate your gain or loss if you decide to convert.
Project K costs $50,000, its expected cash inflows are $15,000 per year for 10 years, and its WACC is 9%. What is the project's payback?
Eric has just purchased a heating oil contract at $2.05 per gallon. The contract size is 21,000 gallons. Initial margin is $6,075; maintenance margin is $4,500. If the price of heating oil is $2.15 when the contract expires, Eric's profit or loss is?..
Explain mutual funds. Explain three advantages to buying mutual funds over individual stocks. Please explain the difference between an actively traded fund vs. and indexed fund.
part 1primary task response your first task is to post your own key assignment outline to the discussion area so that
Farrah owns 5,000 shares of stock in DAS, Inc. with a market value of $15,000.DAS declares a 20% stock dividend. After the dividend is paid, Farrah owns
What is the yield to maturity on a Treasury STRIPS with 11 years to maturity and a quoted price of 63.695?
To hedge a long position in a put option you need to:
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