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The CEO for the Bynum Manufacturing, a producer of building materials located in Durant, Oklahoma, is evaluating a proposal to begin producing asphalt shingles at the firm's idle manufacturing facility on the North side of Denison, Texas. Although the vacant facility has no conceivable alternative use, it is carried on Bynum's books at its historical cost of $3,000,000. The equipment required for the production of asphalt shingles, including Surfacing Sections, an Accumulator, a Granule Mixing System with proportional valve control, and Shingle Cutters will cost $40 million and can be expected to have a useful life of 9 years. The Internal Revenue Service allows machinery used in producing construction materials to be depreciated to a zero salvage value over 5 years using straight-line depreciation. Sales are expected to be $36,000,000 per year during each of the next 9 years. The variable costs of production are expected to be 66.6667 percent of sales. Although the project will not require an investment in accounts receivable, the chief financial officer estimates that the firm will need to maintain an inventory of finished shingles. The industry standard for inventory turnover on the manufacturing side of the construction industry is 24 times per year. The firm has an opportunity cost of capital of 10 percent and a corporate tax rate of 35 percent. Assuming that at the end of 9 years, soon to be enacted EPA regulations will make further investment in the production of asphalt shingles unprofitable, determine whether the firm should undertake the investment in shingle production.
The Internal Revenue Code authorizes decrease for sell or business activities if the espenses is "ordinary and necessary" and also explain the tax cost recovery methods include amortization, depreciation, and depletion.
Abernathy Company was organized on Jan 1, 2012. It is authorized to issue 10,000 shares of 8 percent, $50 par value preferred stock, & 500,000 shares of no-par common stock with a stated value of $2/share.
A stock has a beta of 1.2 and the standard deviation of its returns is 25 percent. The market risk premium is 5 percent and the risk-free rate is 4 percent. Calculate the expected return for the stock
value the common stock of a public company and issue a recommendation to investors whether to buy, sell or hold the stock.
Explain what is the yield that Jane would earn by buying it at this price and holding it to maturity?
Calculate the free cash flows for time 0 through time 5 and calculate the net present value (NPV) for a 12% cost of capital and find the internal rate of return (IRR).
An employer uses a final payment method to estimate retirement payouts to its employees. The yearly payout is 3% of the average salary over the employees' last 3-years of service times the total years employed.
Recently there have been large shifts in the prices of stocks in the stock market. What do you think makes the prices of a firms stock change so much?
What are the projects mostly likely worst and the best case NPV's, what is the projects expected NPV on the basis of the scenario analysis and what is the projects standard deviation of NPV?
The given ventures are at different stages in their life cycles. Identify the likely stage for every venture & explain type of financing every venture is likely to be seeking and identify potential sources for that financing.
Ashley purchase a new PC for $ 1850. She paid a $ 120 down payment & financed the rest for one year at an interest rate of 7 percent.
Rent and other fixed expenses are $1,750 per month. Assume that the only service performed is the giving of tattoos, whose unit price is $12. Determine the annual breakeven point in number of tattoos.
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