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Your company has been approached to bid on a contract to sell 5,200 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 Due to technological improvements, beyond that time they will be outdated and no sales will be possible.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 $4.8 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 $105,000 to be returned at the end of the project, and the equipment can be sold for $285,000 at the end of production. Fixed costs are $650,000 per year, and variable costs are $165 per unit. In addition to the contract, you feel your company can sell 10,500, 11,400, 13,500, and 10,800 additional units to companies in other countries over the next four years, respectively, at a price of $360. This price is fixed. The tax rate is 30 percent, and the required return is 13 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? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
Consider a lottery that pays to the winner an annuity of $950 that begins at the end of the first year and continues at the end of each consecutive year for a total of 9 years with one exception. Because of high administrative costs associated with r..
How much cash flow before tax and interest is necessary to support a project that requires $4 million annually for equity investors and $2 million annually in interest payments if the firm's tax rate is 35%?
Let us say that you are in a country where insider trading is not illegal. You are among a handful of people who knows that company AAA is going to announce earnings tomorrow that will be higher than expected. Consequently you take a large long posit..
Given the following information about Elkridge Sporting Goods, Inc., construct a balance sheet for June 30, 2014. On that date the firm had cash and marketable securities of $25,135, accounts receivable of $43,758, inventory of $166,700, net fixed as..
A new product is being designed by an engineering team at Golem Security. Several managers and employees from the cost accounting department and the marketing department are also on the team to evaluate the product and determine the cost using a targ..
We have a stock Bottine and Despotakis (A&D) which we buy for $10. We keep it for 6 years at which point we sell it for $25. During the six year period, it pays us $12 which we reinvest at 5% annual return. Calculate the rate of return we make per an..
When the economy goes into a recession, do we expect spreads between corporate bonds and treasuries to widen or contract? Why?
Fabrice is looking to buy a new plug-in hybrid vehicle. The purchase price is $12,500 more than a similar conventional model. However, he will receive a $5,600 federal tax credit that he will realize at the end of the year. He estimates that he will ..
A fully amortizing mortgage loan is made for $100,000 at 5 percent interest for 25 years. Payments are to be made monthly.
Calculate the firm's market capitalization and then calculate the enterprise value. b) Use the CAPM formula to determine the firm's cost of equity
Production of the implants will require $1,800,000 in net working capital to start and addition net working capital investments each year equal to 15 percent of the projected states sales increase for the following year. Total fixed costs are $2,500...
If the sales data from 2009-2013 had been 1024, 1499, 1589, 1823, and 1950 using linear regression - what would the projected sales figure for 2014 be? What assumption is made when you use Linear Regression for projecting next year's sales? Is this a..
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