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Aria Acoustics, Inc. (AAI), projects unit sales for a new seven-octave voice emulation implant as follows: Year Unit Sales 1 90,000 2 103,000 3 117,000 4 112,000 5 93,000 Production of the implants will require $1,690,000 in net working capital to start and additional net working capital investments each year equal to 15 percent of the projected sales increase for the following year. Total fixed costs are $1,590,000 per year, variable production costs are $310 per unit, and the units are priced at $425 each. The equipment needed to begin production has an installed cost of $21,900,000. Because the implants are intended for professional singers, this equipment is considered industrial machinery and thus qualifies as seven-year MACRS property. In five years, this equipment can be sold for about 20 percent of its acquisition cost. AAI is in the 30 percent marginal tax bracket and has a required return on all its projects of 18 percent. MACRS schedule What is the NPV of the project?
The real risk-free rate is 3.5%. Inflation is expected to be 1.75% this year and 4.75% during the next 2 years. Assume that the maturity risk premium is zero. What is the yield on 2-year Treasury securities? What is the yield on 3-year Treasury secur..
Given the following info, calculate the weighted average cost for a firm:
You buy a house for $150,000 using a 30-year mortgage at 4.5% interest to be paid monthly.1. What is your payment? 3. Your generous parents agree to give you $10,000 toward your home 4.They offer either to make a down payment (lessening the principal..
Let's say Misty Shadle deposits $310,500 dollars in a CD (Certificate of Deposit) at Star Bank. The bank is offering to pay 4.05% interest for 6 years. What will be the balance in Misty's account six years from today. (NOTE; compounded weekly, 52 tim..
Tricia Velasquez wishes to apply NPV analysis to a newly received order. The company’s credit terms are net 45 days. Its opportunity cost of funds is 12 percent. The order dollar amount is $30,000. Before the agency referral at day 90, and after the ..
Stackhouse Industries has a new project available that requires an initial investment of $5.5 million. The project will provide unlevered cash flows of $775,000 per year for the next 20 years. The companies with operations comparable to this project ..
You are valuing stock in Tofrandi Naturals and are estimating their Beta at 0.2, the risk free rate at 3.16%, and equity risk premium at 6.69. What is your required return in order to invest in this company?
How is relevant costing used in decision making? What would the relevant costs be in deciding whether to discontinue a segment of business? What would the relevant costs be in deciding how to optimize use of a constrained resource?
A project has expected cash inflows, starting with year 1, of $2,200, $2,900, $3,500, and finally in year 4, $4,000. The profitability index is 1.14 and the discount rate is 12 percent. What is the initial cost of the project?
Alexis Co. uses 800 units of a product per year on a continuous basis. The product has a fixed cost of $50 per order, and its carrying cost is $2 per unit per year. determine the average level of inventory (365-day year to calculate daily usage) dete..
What amount would I report as taxable income?
Assume you own 130 shares of Johnson and Johnson. You paid $45/sh. You sold the stock one year later for $49/share. During the year you held the stock, you earned $1.00/sh in Dividends. What was your total dollar return? What was your percentage retu..
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