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The Shoe Store has decided to sell a new line of shoes that will have a selling price of $79 and a variable cost of $38 per pair. The company spent $187,000 for a marketing study that determined the company should sell 112,000 pairs per year for five years. The marketing study also determined that the company will lose sales of 28,000 pairs of its high-priced shoes that sell for $109 and have variable costs of $54 a pair. The company will also increase sales of its in expensiveshoes by 39,000pairs. The inexpensive shoes sell for $39 and have variable costs of $24 per pair. The fixed costs each year will be $2.84 million. The company has also spent $1.29 million on research and development for the new shoes. The plant and equipment required will cost $18.6 million and will be depreciated on a straight-line basis over the life of the project. The new shoes will also require an increase in net working capital of $847,000 that will be returned at the end of the project. The tax rate is 34 percent, and the cost of capital is 12 percent. What is the IRR for the new line of shoes?
A. -18.33%
B. 17.82%
C. 16.11%
D. -13.49%
E. 16.62%
The number of victories (W), earned run average (ERA), runs scored (R), batting average (AVG), and on- base percentage (OBP) for each team in the American League in the 2012 season are provided in the following table. The ERA is one measure of the ef..
Determine the future values $5,000 is invested in each of the following situations:
You purchased 250 shares of General Motors stock at a price of $72.74 two years ago. You sold all stocks today for $88.44. During this period the stock paid dividends of $4.20 per share. What is your annualized holding period return (annual percentag..
An increase in capital per worker will: Technological progress will: If technology advances, then:
Compound interest with no annual periods- Calculate the future sum of $3,000, given that it will be held in the bank 7 years at an annual interest rate of 5 percent. Recalculate part (A) using compounding periods that are (1) semi-annual and (2) bimo..
Allen Green is a single taxpayer with an AGI (and modified AGI) of $210,000, which includes $170,000 of salary, $25,000 of interest income, $10,000 of dividends, and $5,000 of long-term capital gains. What is Allen's Net Investment Income tax liabili..
Beckman Engineering and Associates (BEA) is considering a change in its capital structure. BEA currently has $20 million in debt carrying a rate of 8%, and its stock price is $40 per share with 2 million shares outstanding. What is BEA's unlevered be..
Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.79 million. The fixed asset falls into the three-year MACRS class. The project is estimated to generate $2,110,000 in annual sale..
Early in September 1983, it took 255 Japanese yen to equal $1. Nearly 28 years later, in August 2011, that exchange rate had fallen to 125 yen to $1. Has the price, in dollars, of the automobile increased or decreased during the 28-year period becaus..
Able, Baker, and Charlie are the only three stocks in an index. The stocks sell for $57, $315, and $114, respectively. If Baker undergoes a 3-for-2 stock split, what is the new divisor for the price-weighted index?
The operating cost of a new machine is $500 for the first year. Starting the second year, the operating cost increases by $200 per year for the next 10 years. Calculate the equivalent annual operating cost of the machine. What will be the present and..
Assume you are at the beginning of 2001. The real risk-free rate of interest is 3 percent and expected to remain constant. Inflation is expected to be 2 percent, 3 percent, 4 percent, and 5 percent in years 2001, 2002, 2003, and 2004, respectively. T..
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