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You have developed a new a new recreational tennis racket with tennis great Jimmy Connors. You have paid Jimmy Connors for his involvement in the project $250,000. The racket is state of the art and guaranteed to correct any backhand. You now need to decide if you want to proceed with mass marketing of this racket. You estimate the sales price of the new racket to be $400 per racket and sales volume to be 1,000 units in year 1, 1,250 units in year 2; and 1,325 units in year 3. The project has a three year life. Variable costs amount to $225 per unit and fixed costs are $100,000 per year. The project requires an initial investment of $165,000 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 three is expected to be $35,000. NWC requirements at the beginning of each year will be 20 percent of the projected sales during the coming year. The tax rate is 34 percent and the required return on the project is 10 percent.
A. What will the annual incremental cash flows for the project be?
B. Using NPV analysis should the project be undertaken? Explain.
Regarding the auto industry, do you see vehicles being standard across the globe so manufacturers don't need to create different models in different areas? Chances are that in 20 years driverless cars will be common if not prevalent so this industry ..
A bond matures in 30 years, has a 20 year duration and a yield to maturity of 9.32%. The change in the level of the market interest rate is 0.47%. What is the modified duration and the percentage change in price? What is the tax-equivalent yield of a..
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getting better as the series winds down. kevin connolly directs the episode as we move forward with the storylines.
Your client is 35 years old; and she wants to begin saving for retirement, with the first payment to come one year from now. She can save $9,000 per year; and you advise her to invest it in the stock market, which you expect to provide an average ret..
Big Brothers, Inc. borrows $431,375 from the bank at 13.20 percent per year, compounded annually, to purchase new machinery. This loan is to be repaid in equal annual instalments at the end of each year over the next7 years. How much will each annual..
brown ltd operates outdoor amusement centres in a number of country towns. the company has decided to build another
As a general rule, the capital structure that maximizes firm value, or stock price also maximizes the expected rate of return on equity (ROE), maximizes the weighted average cost of capital (WACC)
A bond for Firebird, Inc. has a coupon rate of 7% and face value of K1000, 000. The yield to maturity is 6.8%. The bond has a remaining life of 30 years and makes annual coupon payments? What is this bond's current market value?
A company has cash of $500, accounts receivable of $200, and inventory of $400. The company also has current liabilities of: accounts payable $300 and notes payable $600. What is the company's current ratio?
Which of the following is not a derivative security?
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