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Glucose Scan Incorporated (GSI) currently sells its latest glucose monitor, the Glucoscan 3000, to diabetic patients for $129. GSI is considering lowering the sale price to $99 per unit. The cost of goods sold for each Glucoscan unit is $50, and GSI expects to sell 100,000 units over the next year. The marginal corporate tax rate is 40%. Suppose that if GSI drops the price on the Glucoscan 3000 to $99 immediately, it can increase sales over the next year by 30% to 130,000 units.
Also suppose that for each Glucoscan monitor sold, GSI expects additional sales of $100 per year on glucose testing strips and these strips have a gross profit margin of 75%. These strip sales occur on all monitor sales regardless of the price of the monitor. Including the increase in the sale of testing strips, the incremental impact of this price drop on the firms EBIT is closest to:
Your portfolio is 150 shares of Davis, Inc. The stock currently sells for $76 per share. The company has announced a dividend of $1.45 per share with an ex-dividend date of April 19. Assuming no taxes, how much will your stock be worth on April 19?
Suppose a riskless project requires an initial investment of $10 and will generate a one-time cash inflow of $30 two years later. Assuming a risk-free interest rate of 5%, which of the following statements about the project is NOT true?
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explore the capital budgeting techniques covered in the unit, NPV, PI, IRR, and Payback. Compare and contrast each of the techniques with an emphasis on comparative strengths and weaknesses
Change in accounting estimate
you have just graduated and one of your favorite courses was financial management.nbsp while you were in school your
Juicers Inc. is thinking of acquiring Fast Fruit Company. Juicers expects Fast Fruit's NOPAT to be $9 million the first year, with no net new investment in operating capital and no interest expense. For the second year, Fast Fruit is expected to have..
Thomas Brothers is expected to pay a $2.4 per share dividend at the end of the year (that is, D1 = $2.4). The dividend is expected to grow at a constant rate of 4% a year. The required rate of return on the stock, rs, is 16%. What is the stock's curr..
Barry and his wife Mary have accumulated over $7 million during their 54 years of marriage. They have ten children and twelve grandchildren. How much money can Barry and Mary gift to their children in 2013 without any gift tax liability?
Pace Corporation had a taxable income of $300,000 in 2007. Which of the following expression may be used to compute the federal income tax liability for the company?
Sensitivity analysis: a. is a logical extension of partitioning to determine what portions of the forecast merit further refinement. b. is similar in form to payback analysis, except that it is done on a present value basis. c. is a substitute for th..
Horatio Alger has just become product manager for Brand X. Brand X is a consumer product with a retail price of $1.00. Retail margins on the product are 33%, while wholesalers take a 12% margin. Brand X and its direct competitors sell a total of 20 m..
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