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McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $748 per set and have a variable cost of $378 per set. The company has spent $168,000 for a marketing study that determined the company will sell 76,800 sets per year for seven years. The marketing study also determined that the company will lose sales of 10,300 sets per year of its high-priced clubs. The high-priced clubs sell at $1,380 and have variable costs of $720. The company will also increase sales of its cheap clubs by 12,800 sets per year. The cheap clubs sell for $358 and have variable costs of $143 per set. The fixed costs each year will be $11,380,000. The company has also spent $1,180,000 on research and development for the new clubs. The plant and equipment required will cost $25,760,000 and will be depreciated on a straight-line basis. The new clubs will also require an increase in net working capital of $1,680,000 that will be returned at the end of the project. The tax rate is 34 percent, and the cost of capital is 13 percent. Required: Calculate the payback period, the NPV, and the IRR. (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).)
Which of the following are considered to be the least risky?
Suppose you have a subject property with a 107,000 sqft lot and existing improvements for which you estimate the reproduction cost new to be $3,250,000, physical deterioration to be $300,000, functional obsolescence to be $20,000 and external obsoles..
Consider the following information concerning three portfolios, the market portfolio, and the risk-free asset: Portfolio RP σP βP X 13.00 % 30.00 % 1.30 Y 12.00 25.00 1.10 Z 7.00 15.00 .75 Market 10.10 20.00 1.00 Risk-free 5.00 .00 .00 Assume that th..
Why do higher marketing variable costs not increase total variable costs on the income statement? Select One Save Answer A. Marketing costs are considered period costs on the income statement
Penn Corp. is analyzing the possible acquisition of Teller Company. Both firms have no debt. Penn believes the acquisition will increase its total aftertax annual cash flows by $2 million indefinitely. The current market value of Teller is $43 millio..
Hardin-Gehr Corporation (HGC) began operations 5 years ago as a small firm serving customers in the Detroit area. However, its reputation and market area grew quickly. Today HGC has customers all over the United States. Despite its broad customer bas..
If the spot yield curve is flat, that is, the rate for all maturities are the same, does it mean that the Forward curve will also be flat? Explain the reason for your answer.
Box plc is considering the acquisition of Circle plc. The former is valued at £100m and the latter at £50m by the market. What is the present value of the gain form the merger? If a cash offer of £70m is accepted by Circle's shareholders what is the ..
A zero coupon bond with a face value of $1000 is issued with an initial price $507.96. the bond matures in 18 years. what is the implicit interest in dollars for the first year of the bond's life . use semi-annual compounding.
Since depreciation is a cash expense, the faster an asset is depreciated, the lower the projected NPV from investing in the asset. Under current laws and regulations, corporations must use straight-line depreciation for all assets whose lives are 5 y..
We receive a mortgage loan for 20 years.. The mortgage rate is 6% per annum. Additionally, the monthly payment we ought to make to the bank to amortize the loan is $2, 500. Fourthly, if we accumulate a lot by year 10(end of the year), how much would ..
Which one of the following is an example of diversifiable risk?
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