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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.
You are 62 years old, and your house appraises for $450,000. A bank is willing to give you a reverse mortgage at 50% LTV with a 6% fixed contract rate. You choose an option to receive equal monthly payments over a period of 10 years. What will these ..
You want to create a portfolio equally as risky as the market, and you have $2,700,000 to invest. Given this information, fill in the rest of the following table:
Niko has purchased a brand new machine to produce its High Flight line of shoes. The machine has an economic life of four years. The depreciation schedule for the machine is straight-line with no salvage value.
Suppose you are creating a butterfly spread using 3 call options with different strike prices. Currently, the call price with strike price of $40 is $22.26, the call with strike price of $50 is $10.9, and the call with strike price of $60 is $5.58. W..
A Treasury issue is quoted at 107:17 bid and 107:31 ask. Assume a face value of $1,000. What is the least you could pay to acquire a bond?
robertrsquos new way vacuum cleaner company is a newly started small business that produces vacuum cleaners and belongs
Jennifer was awarded damages of $150,000 in a successful lawsuit she brought against her employer 6 years ago. Simple interest on the judgment accrues at the rate of 15%/year from the date of filing. If the case were settled today, how much would Jen..
In the following, assume that the CAPM is true. Denote by rM the return of the market portfolio, βi the beta of security i with the market portfolio, and ρi,M the correlation between security i and the market portfolio M. Find the risk-free rate rf o..
(Bond Valuation) Crawford Inc. has two bond issues outstanding, both paying the same annual interest of $85, called Series A and Series B. Series A has a maturity of 12 years, whereas Series B has a maturity of 1 year. Why does the longer-term (12-ye..
Assume that all interest rates in the economy decline from 10% to 9%. Which of the following bonds would have the LARGEST percentage increase in price?
Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next eight years, because the firm needs to plow back its earnings to fuel growth. The company will then pay a dividend of $16.50 per share 9 years..
Last year, California Sushi and Such (CSS) had sales of $65 million. The firm's operating expenses amounted to $20 million and costs of goods sold totalled $15 million. In addition, CSS received $80,000 in dividend income, and paid $300,000 in divide..
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