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Alson needs someone to supply it with 120,000 cartons of machine screws per year to support its manufacturing needs over the next 7 years, and you've decided to bid on the contract. It will cost you $624,000 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 7 years, this equipment can be salvaged for $40,000. Your fixed production costs will be $192,000 per year, and your variable production costs should be $6.80 per carton. You also need an initial investment in net working capital of $60,000, all of which will be recovered at the end of the project. If your tax rate is 31 percent and you require a 17 percent return on your investment, you should submit a bid price per unit of $______?
HINT: Calculate all other cash flows except the OCF related to the contract. Take the present value of all the CFFA after time zero and set it equal to the start-up cost. Since the CFFA will contain OCF (which you don't know), you can solve for the OCF that provides an NPV of zero. Given that OCF, figure out what price would provide that OCF.
Jones Design wishes to estimate the value of its out-standing preferred stock. The preferred issue has an $80 par value and has a dividend rate of 8 percent. Similar-risk preferred stocks are currently earning a 12% annual rate of return. What is the..
Suppose the spot price of gold is $1200 per ounce. The futures price for delivery in six months is $1208, while the futures price for delivery in one year is $1214. The interest rate on 6-month loans is 1.00percent (on an annual basis). What is the i..
Company has total assets of $35.594 billion, total debt of $9.678 billion, and net sales of $23.670 billion. Their net profit margin for the year was 0.20, while the operating profit margin was 30 percent. What is Company's net income? (Answer needs ..
Calculate the difference between the future value of the following investment using annual and daily compounding: (a) Present Value: $20,000, (b) Interest Rate: 6%, and (c) Number of Periods: 30 Years.
What is the Net Working Capital for 2012 and what is it for 2011 - what is the Change in Net Working Capital (NWC)?
Security A has an expected rate of return of 6%, a standard deviation of returns of 30%, a correlation coefficient with the market of -0.25, and a beta coefficient of -0.5. Security B has an expected return of 11%
Determine the appropriate weights to use in determining Circus' WACC and calculate Circus' cost of debt and cost of issuing new common equity.
Puckett follows a residual distribution policy with all distribution as dividends, what will be its dividend payout ratio?
Consider companies that have very distinct seasonal variations. Some companies may have periods of very little to no sales. Discuss the importance of budgeting for these types of companies.
Evaluate the company's weights of capital (debt, preferred stock and common stock) and estimate the company's before-tax and after-tax component cost of debt.
Miley expects to receive the following payments: Year 1 = $50,000; Year 2 = $28,000; Year 3 = $12,000. All of this money will be saved for her retirement. If she can earn an average of 10.5 percent on her investments, how much will she have in her ac..
Did the Federal Reserve's policy of quantitative easing benefit or hurt smaller and more entrepreneurial firms over the past five years? What evidence supports your position?
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