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You are evaluating a project for your company. You estimate the sales price to be $210 per unit and sales volume to be 3,100 units in year 1; 4,100 units in year 2; and 2,600 units in year 3. The project has a three-year life. Variable costs amount to $60 per unit and fixed costs are $155,000 per year. The project requires an initial investment of $204,000 in assets which will be depreciated straight-line to zero over the three-year project life. The actual market value of these assets at the end of year 3 is expected to be $31,000. NWC requirements at the beginning of each year will be approximately 11 percent of the projected sales during the coming year. The tax rate is 35 percent and the required return on the project is 11 percent. What is the operating cash flow for the project in year 2?
Which of the following is correct?
a.) $392,000
b.) $254,800
c.) $322,800
d.) $370,400
Biochemical Corp. requires $500,000 in financing over the next three years. The firm can borrow the funds for three years at 10.60 percent interest per year. The CEO decides to do a forecast and predicts that if she utilizes short-term financing inst..
Consider a firm with a contract to sell an asset for $165,000 four years from now. The asset costs $94,000 to produce today. Given a relevant discount rate on this asset of 13 percent per year, will the firm make a profit on this asset?
A $1000 bond with semi-annual coupons, with coupon rate of 6% per annum convertible semi-annually, matures at par on October 15th, 2020. The bond is purchased on June 28th, 2005 to yield the investor a nominal rate of 7% per annum convertible semi-an..
Find the sustainable and internal growth rates for a firm with the following ratios: asset turnover = 2.00; profit margin = 7%; payout ratio = 30%; equity/assets = .60. (Do not round intermediate calculations. Enter your answers as a percent rounded ..
Ansell. Inc., a medical device manufacturer uses compressed air in solenoids and pressure switches in its machines to control various mechanical movements. Over the years, the manufacturing floor has changed layouts numerous times. If Ansell decide t..
The appropriate capital budgeting decision rule is ____
Energy Tech company issued an 8% (semi-annual payment) 20 year bond 5 years ago. If the yield of similar bond today is 6%, what is the bond price? What is the current yield?
The financial staff of Cairn Communications has identified the following information for the first year of the roll-out of its new proposed service. What is the project's operating cash flow for the first year
FRN and Expected Cash Flows. A U. S. firm issues a three- year FRN with a face value of $ 250,000. The coupon is set at LIBOR plus 50 basis points and is paid annually. The coupon rate is set at the beginning of the year. The firm’s CEO notes that th..
In general, the cost of debt capital is lower than the cost of equity capital. For this reason, it might be expected that firms with high debt ratios would have a lower weighted average cost of capital. Explain at least one reason why this is not the..
Warmack Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $490,000 is estimated to result in $200,000 in annual pretax cost savings
Nordique Fab is an Arizona company dedicated to circuit board design and fabrication. It has acquired new stations and software for its three facilities at a cost of $450,000 per site. The estimated MV for each system the fourth year is expected to b..
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