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Pappy’s Potato has come up with a new product, the Potato Pet (they are freeze-dried to last longer). Pappy’s paid $135,000 for a marketing survey to determine the viability of the product. It is felt that Potato Pet will generate sales of $590,000 per year. The fixed costs associated with this will be $194,000 per year, and variable costs will amount to 20 percent of sales. The equipment necessary for production of the Potato Pet will cost $650,000 and will be depreciated in a straight-line manner for the four years of the product life (as with all fads, it is felt the sales will end quickly). This is the only initial cost for the production. Pappy’s is in a 30 percent tax bracket and has a required return of 12 percent. Requirement 1: Calculate the payback period for this project. Requirement 2: Calculate the NPV for this project.
Without referring to the pre programmed function on your financial calculator, use the basic formula for the present value, along with the given opportunity cost r, and the number of periods, n, to calculate the present value of $1 in the case shown ..
What is the net cash flow from operating activities? What is the net cash flow from investing activities? What is the net cash flow from financing activities? What is the change in cash?
Evening Story Corporation has sales of $4,732,270; income tax of $558,166; the selling, general and administrative expenses of $264,444; depreciation of $328,532; cost of goods sold of $2,840,400; and interest expense of $153,129. Calculate the amoun..
Tesla Corporation needs to raise funds to finance a plant expansion, and it has decided to issue 25-year zero coupon bonds to raise the money. The required return on the bonds will be 9 percent. What will these bonds sell for at issuance?
A firm has 120,000 shares of stock outstanding, a sustainable rate of growth of 3.8, and $648,200 in free cash flows. What value would you place on a share of this firm's stock if you require a 14% rate of return?
Describe one weakness and one strength of the gold standard. Do you agree with Milton Friedman that any system of pegged exchange rates is not a satisfactory system for countries with independent political systems; or do you agree with Ronald McKinno..
You have just joined an investment banking firm. They have offered you two different salary arrangements. You can have $50,000 per year for the next 3 years or $25,000 per year for the next 3 years, along with a $50,000 signing bonus today. If the ma..
Depository institutions typically differentiate between interest and noninterest income and expense. What are the primary components of each? Define net interest income (NIM) and burden. What does a bank's efficiency ratio measure?
Grohl Co. issued 14-year bonds a year ago at a coupon rate of 9 percent. The bonds make semi annual payments. If the YTM on these bonds is 9 percent, what is the current bond price?
A trader has a put option contract to sell 100 shares of stock for a strike price of $60. What's the effect on the terms of the contract if (a) a $2 cash dividend (b) a 5-for-2 stock split (c) a 5% stock dividend is being paid?
Kuhn Company is considering a new project that will require an initial investment of $4 million. It has a target capital structure of 58% debt, 6% preferred stock and 36% common equity. Flotation costs will represent 8% of the funds raised by issuing..
Suppose your company imports computer motherboards from Singapore. The exchange rate is currently 1.2875 S$/US$. You have just placed an order for 27,000 motherboards at a cost to you of 237.50 Singapore dollars each. You will pay for the shipment wh..
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