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McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $840 per set and have a variable cost of $440 per set. The company has spent $154,000 for a marketing study that determined the company will sell 58,000 sets per year for seven years. The marketing study also determined that the company will lose sales of 9,900 sets of its high-priced clubs. The high-priced clubs sell at $1,140 and have variable costs of $740. The company will also increase sales of its cheap clubs by 11,400 sets. The cheap clubs sell for $480 and have variable costs of $250 per set. The fixed costs each year will be $9,140,000. The company has also spent $1,150,000 on research and development for the new clubs. The plant and equipment required will cost $28,980,000 and will be depreciated on a straight-line basis. The new clubs will also require an increase in net working capital of $1,340,000 that will be returned at the end of the project. The tax rate is 38 percent, and the cost of capital is 10 percent.
Suppose you feel that the values are accurate to within only ±10 percent. What are the best-case and worst-case NPVs? (Hint: The price and variable costs for the two existing sets of clubs are known with certainty; only the sales gained or lost are uncertain.)
A company currently pays a dividend of $4 per share (D0 = $4). It is estimated that the company's dividend will grow at a rate of 21% per year for the next 2 years, then at a constant rate of 7% thereafter. The company's stock has a beta of 0.9, the ..
Mississippi River Shipyards is considering the replacement of an 8-year-old riveting machine with a new one that will increase earnings before depreciation from $27,000 to $56,000 per year. The old machine has been fully depreciated and has no salvag..
A project requires an initial cash outlay of $60,000 and has expected cash inflows of $15,000 annually for 8 years. The cost of capital is 10%. What is the project’s IRR? Show your work.
You bought 100 shares of star bucks corp. (sbux) 7 years ago (1aug'95) for $5.90 per share and sold the 100 shares today for $20.31 each. what are your returns? at the same time your sister bought 100 shares of coca- cola (ko). how did your returns c..
Paltrow Company made an investment in another that guarantees cash flow $ 22,500 each year for the next five years. If the company uses a discount rate of 15% on their investments, what is the present value of this investment?
The Final Paper will involve applying the concepts learned in class to an analysis of a company using data from its annual report. Using the concepts from this course, you will analyze the strengths and weaknesses of the company and write a report..
Killer Whale, Inc. has the following balance sheet statement items: total current liabilities of $675653; net fixed and other assets of $1232100; total assets of $3457010; and long-term debt of $883585. What is the amount of the firm's current assets..
You’ve just joined the investment banking firm of Dewey, Cheatum, and Howe. They’ve offered you two different salary arrangements. You can have $7,100 per month for the next three years, or you can have $5,800 per month for the next three years, alon..
Discuss the role of a third party intermediary in an interest rate swap agreement. Describe the risks assumed by the intermediary. How does the intermediary potentially profit from this activity?
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. In industries with volatile earnings, the residual dividend policy results in the most consisten..
assessment for the interim assessment of international financial managementyou are required to prepare a report of 2500
Big Dom’s Pawn Shop charges an interest rate of 27.6 percent per month on loans to its customers. Like all lenders, Big Dom must report an APR to consumers. What is the effective annual rate?
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