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Another utilization of cash flow analysis is setting the bid price on a project. To calculate the bid price, we set the project NPV equal to zero and find the required price. Thus the bid price represents a financial break-even level for the project. Guthrie Enterprises needs someone to supply it with 140,000 cartons of machine screws per year to support its manufacturing needs over the next five years, and you've decided to bid on the contract. It will cost you $1,800,000 to install the equipment necessary to start production; you'll depreciate this cost straight-line to zero over the project's life. You estimate that in five years this equipment can be salvaged for $150,000. Your fixed production costs will be $265,000 per year, and your variable production costs should be $8.50 per carton. You also need an initial investment in net working capital of $130,000. If your tax rate is 35 percent and you require a 14 percent return on your investment, what bid price per carton should you submit?
What are the advantages and disadvantages of issuing both types of shares? Which type of shares would you decide to issue and why? What affect would the new issuance have on the financial statements?
Issuance of SI par value common stock at an amount greater than par value and donation of land by a governmental unit to a corporation
What is the net interest income earned in dollars on this one-year transaction if the spot rate of U.S. dollars for Australian dollars and U.S. dollars for BPs at the end of the year are 0.588 and 1.848, respectively?
Suppose you have determined the profitability of a planned project by finding the present value of all the cash flow from that project.
Explain Decision making based on the NPV and Profitable index and IRR criterion
Computation of the value of the annuity payment and would you have to deposit each year if your first deposit is made now and the final deposit is made one year
If the cost of common equity for the firm is 17.3% the cost of preferred stock is 10.9%, the beforetax cost of debt is 7.9%, and the firm's tax rate is 35%, what is the QM weighted cost of capital?
Ninja Co. issued 13-year bonds a year ago at a coupon rate of 7.9 percent. The bonds make semiannual payments. If the YTM on these bonds is 6.2 percent, what is the current bond price?
The Lighting Store has sales of $364,000, depreciation of $28,000, and taxable income of $58,000. The capital intensity ratio is 1.2, the debt-equity ratio is 0.45, and the tax rate is 34%. What is the return on assets?
Describe how rapidly expending sales can drain the cash resources of a firm and discuss and explain the relative volatility of short-and long-term interest rates.
An amortized loan has 10 annual payments at the end of each year starting one year from now. The first 5 payments are $1000 each and the final 5 payments are $500 each.
If 8000 units were in starting inventory, 24,000 units per started and 6,000 units were in the ending inventory how many units were finished and transferred out ?
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