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Mama Italiano Sauce Production of jars sauce-$20,000 Ingredient cost (variable)-$16,000 Labor cost (variable)-$9,000 Rent (fixed)-$4,000 Depreciation (fixed)-$6,000 Other (fixed)-$1,000 Total: $36,000 The company is currently producing and selling 250,000 jars of sauce annually. The jars of sauce sell for $4 per jar. The company is considering lowering the price to $3.60. Per jar. Suppose this action action will increase sales to 316,500 jars of Saudi . What is the incremental revenue associated with the price reduction of sauce?
Normal tea companies grow at a constant rate of 5%. However, Taya's Tea Company has tested a brand new tea that will lead to significant growth. The current dividend is $3.0, but over the next two years it will grow by 25%. What is the dividend yield..
Your company has just agreed to sell one of its factories for 8,200,000. You built the factory for 5,000,000 2 years ago. You have been depreciating the factory straight line over its useful life of 10 years. If the tax rate is 40%, what will your ca..
Titan Mining Corporation has 8.6 million shares of common stock outstanding, 300,000 shares of 5 percent preferred stock outstanding, and 160,000 7.4 percent semiannual bonds outstanding, par value $1,000 each. What is the firm’s market value capital..
Consider two mutual funds, A and B. The beta for fund A is .60, and the standard deviation of the rate of return = .20. The beta for fund B. is 1.30 and its standard deviation of the rate of return = .325. The standard deviation of the market portfol..
Assume the spot Swiss franc is $0.7000 and the six-month forward rate is $0.6950. What is the minimum price that a six-month American call option with a striking price of $0.6800 should sell for in a rational market? Assume the annualized six-month E..
What is financial risk? Assume two companies are identical in their operations but one borrows and the other is an all equity financed. Which one will have a higher total business risk? What is the reflection of the higher risk level?
The Acu Punct Corporation is considering the purchase of a new machine with an initial outlay of $4,500 and expected cash flows in years 1-4 of $2,200. The certainty equivalent coefficient for each period is 0.87. The appropriate discount rate for th..
Determine the maximum? 30-year fixed-rate mortgage amount for which a couple could qualify if the rate is 4.38 percent. Assume they have other debt payments totaling $336 per month and a combined annual income of $66,100. The maximum? 30-year fixed-r..
It's early morning on January 1st, 2014 and Mr. Specter is thinking about investing in Alberta Oil Sands Corp. Alberta Oil Sands Corporation reported earnings per share (EPS) of $2 as of December 31, 2013 but paid no dividends. Earnings are expected ..
A company currently has $2.40 per share in free cash flows to equity (FCFE). The FCFE are anticipated to grow at 6% per year. If the investor’s required return is 14%, what is the anticipated value of the firm at the end of 3 years?
Suppose that a firm has common stock that currently trades for $54.65 in the marketplace, paid an annual dividend last year of $3.25, and has flotation costs of 13.13%. Also, the firm in question had this year $105 million in EBIT, $25 million in int..
Critically reflect on the importance of capital budgeting. Why is this such a heated subject in many boardrooms? How does capital budgeting promote the financial health of an organization? How will you use the financial techniques you have learned th..
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