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A business opportunity has presented itself to you and one of your classmates. Your opportunity is to enter the fast growing craft beer industry. Your projected sales in the first year are 8300 kegs. Your projected growth rate is 5 percent. Entering the business will require $35,000 of net working capital. Total fixed costs are $95,000. Variable production costs are $36 per keg and keg sales are priced at $57 each. The equipment to begin production is $175,000. The equipment will be depreciated using straight line depreciation over a five year life and has no salvage value. The tax rate is 35 percent and the required return is 25 percent. What is the NPV of the project and should you pursue the project?
A) -$2,082.17 No, do not take the project.
B) $17,422.51 Yes, take the project.
C) -$35,025.85 No, do not take the project.
A trader buys a call option with a strike price of $30 for $3. Does the trader ever exercise the option and lose money on the trade? Explain your answer.
A five-year project has an initial fixed asset investment of $275,000, an initial NWC investment of $23,000, and an annual OCF of −$22,000. The fixed asset is fully depreciated over the life of the project and has no salvage value. If the required re..
First Simple Bank pays 9 percent simple interest on its investment accounts. If First Complex Bank pays interest on its accounts compounded annually, what rate should the bank set if it wants to match First Simple Bank over an investment horizon of 1..
Nungesser Corporation's outstanding bonds have a $1,000 par value, a 6% semi-annual coupon, 18 years to maturity, and an 7.5% YTM. What is the bond's price? Round your answer to the nearest cent.
Samuelson will produce 20,000 units in January using level production. If each unit costs $500 to manufacture, what is the dollar value of ending inventory in January if beginning inventory is 10,000 units and January sales are 15,000?. Select one: a..
The Audit Committee is responsible for obtaining the appropriate input from management and considers the type and scope of work to be performed by the auditor and the audit fees associated with the audit.
Enter the missing values in the financial statements. Assume the company started operations January 1, 2013, and all transactions involve cash.
Using the free cash flow method of valuation, an analyst determines the value of Company A's stock to be $12 and the value of Company B's stock to be $15. Other things be held constant, what could account for the higher valuation for Company B?
Explain how you could use a basic interest rate swap to accomplish this. Using the data, choose swap terms that convert this fixed rate loan to a floating rate loan and demonstrate the resulting rate you would earn on the loan from adding the swap to..
The Morris Corporation has $600,000 of debt outstanding, and it pays an interest rate of 8% annually. Morris’s annual sales are $3 million, its average tax rate is 40%, and its net profit margin on sales is 3%. If the company does not maintain a TIE ..
The preferred capital structure weights to be used in the weighted average cost of capital are____.
Among the forms of fundamental analysis (economic, industry, company and financial analysis), which type of data do you think is the least reliable, the least relevant to most investors, and the most difficult to acquire?
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