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Your company has been approached to bid on a contract to sell 4,000 voice recognition (VR) computer keyboards a year for four years. Due to technological improvements, beyond that time they will be outdated and no sales will be possible. The equipment necessary for the production will cost $3.6 million and will be depreciated on a straight-line basis to a zero salvage value. Production will require an investment in net working capital of $93,000 to be returned at the end of the project, and the equipment can be sold for $273,000 at the end of production. Fixed costs are $638,000 per year, and variable costs are $153 per unit. In addition to the contract, you feel your company can sell 9,300, 10,200, 12,300, and 9,600 additional units to companies in other countries over the next four years, respectively, at a price of $300. This price is fixed. The tax rate is 40 percent, and the required return is 10 percent. Additionally, the president of the company will undertake the project only if it has an NPV of $100,000. What bid price should you set for the contract?
Indirect Effects on Project Cash Flow, Provide an example of an Opportunity Cost that would arise in your firm when considering a new project.
The following facts are presented on an opportunity to invest in Machine A: Cost of equipment is $200,000. The machine has an expected 4-year useful life; it will be depreciated according to the 3-year Modified Accelerated Cost Recovery System (MACRS..
What is the bonds nominal annual coupon interest rate - What is the liquidity premium (LP) on Niendorf's bonds - what is the present value of the cash flow stream
An explanation of your understanding of what loans really cost to consumers, and How you feel about adjustable rate mortgages (ARMs) and borrowing practices Please include information and topics from the chapter readings to justify your explanation a..
A corporate bond pays 11% percent interest. You are in the 30 percent tax bracket. What is your after-tax interest on this bond?
Under the WTO's dispute-settlement procedures, who can bring a complaint for nullification and impairment? a. A corporation b. A group of corporations within an industry c. A government d. All of the above
Using this information and the PPP theory, describe the expected nominal return to US investors who invest in Mexico.
NU YU announced today that it will begin paying annual dividends. The first dividend will be paid next year in the amount of $0.63 a share. The following dividends will be $0.68, $0.83, and $1.13 a share annually for the following three years, respec..
Simpkins Corporation is expanding rapidly, and it does not pay any dividends because it currently needs to retain all of its earnings. However, investors expect Simpkins to begin paying dividends, with the first dividend of $1.00 coming 3 years from ..
In a stock swap, the acquiring firm issues shares of stock in order to pay for the acquistion. a leveraged merger is between unrelated firms. a leveraged buyout involves creating a new company out of part of your company and then selling shares of th..
The 7.5 percent preferred stock of Rock Bottom Floors is selling for $60 a share. What is the firm's cost of preferred stock if the tax rate is 35 percent and the par value per share is $100?
Assume the total cost of a college education will be $200,000 when your child enters college in 15 years. You presently have $80,000 to invest. What rate of interest must you earn on your investment to cover the cost of your child's college education..
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