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Infinity Designs, an interior design company, has experienced a drop in business due to an increase in interest rates and a corresponding slowdown in remodeling projects. To stimulate business, the company is considering exhibiting at the Home and Garden Expo. The exhibit will cost the company $12,000 for space. At the show, Infinity Designs will present a slide show on a PC, pass out brochures that are printed previously, (the company printed more than needed), and show its portfolio of previous jobs. The company estimates that revenue will increase by $36,000 over the next year as a result of the exhibit. For the previous year, profit was as follows: Revenue $201,000 Less: Design supplies (variable cost) $15,000 Salary of Samantha Spade (owner) 80,000 Salary of Kim Bridesdale (full time employee) 55,000 Rent 18,000 Utilities 6,000 Depreciation of office equipment 3,600 Printing of advertising materials 700 Advertising in Middleton Journal 2,500 Travel expenses other than depreciation of autos (variable cost) $3,000 Depreciation of company cars 9,000
Viking Manufacturing, Inc. currently begins each sales cycle with 12,500 vacuum cleaners in stock. This stock is depleted at the end of each sales cycle and then reordered. What is the total cost of current inventory policy? What is the restocking co..
Given the following: default premium = 0.50 % pts.; inflation 3.75%; real rate = 1.25%; maturity premium = 1.15% pts., what would be the nominal rate?
Your own 5,000 acres of farmland in Kansas and grow feed corn, currently selling at $3 per bushel. You expect to harvest about 1000 bushel per acre in August. Would you take any action regarding the future. What instrument would you use?
Smith Technologies is expected to generate $50 million in free cash flow next year, and FCF is expected to grow at a constant rate of 6% per year indefinitely. Smith has no debt or preferred stock, and its WACC is 15%. If Smith has 40 million shares ..
The Sleeping Flower Co. has earnings of $1.48 per share. If the benchmark PE for the company is 15, how much will you pay for the stock? If the benchmark PE for the company is 18, how much will you pay for the stock?
Explain the meaning of the debt capacity calculation at row 62 and explain how the EBIT Chart works (inputs determining the outputs-the two lines on the chart and the indifference point.
For major currencies, nominal interest rate contracts are actively traded in the Eurocurrency market. Likewise, there are active spot and forward markets for major currencies. Therefore, the interest rate parity always holds. Describe 3 consideration..
FIN201 - Financial Management - Explain how do you find the value of a bond, and why do bond prices change - explain how inflation affects interest rates?
The Turkish Lira (TL) was officially devalued by the Turkish government in February 2001 during a severe political and economic crisis. The Turkish government announced on February 21 that the lira would be devalued by 20%. The spot exchange rate on ..
Gabbys garage issued a bond with a 10-year maturity, a $1,000 par value, a 10 percent coupon rate, and semi-annual interest payments. Two years after the bond was issued, the going rate of interest on similar-risk bonds fell to 6 percent. Suppose the..
What is operating leverage? How if at all, is it similar to financial leverage? If a firm has high operating leverage, would you expect it ot have high or low financial leverage? explain your reasoning?
Suppose that you receive $500 at the end of each future month for 5 years the discount rate is 12% (APR). What is the present value? Suppose that you deposit $500 at the end of each future month into an account paying 6% (APR). How much will have in ..
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