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Walmart is considering opening a small experimental store in New York City. A store is expected to have a long economic life, but the valuation horizon is 15 years. The store in New York is likely to generate revenues of $34M in the first year and then it grows at 5.5%. But the costs of running the business are high because the margins on all the products sold are low. (It is a volume business!) The cost of goods sold is $11M in year 1 and it is expected to grow at 3.5% per year thereafter. Selling and administration costs are likely to be $0.6M every year as it is a small store. The tax rate is 35%. Walmart is so good at managing its stores that working capital increases can be assumed to be negligible. But since New York City is an expensive place, Walmart will have to invest $200M in purchasing a building (with land) even though it is a much smaller property than a usual Walmart store. The good news is that this outlay can be straight line depreciated over 15 years. Also, Walmart has estimated that the after-tax terminal value in year 15 dollars is $125M. This value is the present value of all cash flows in year 16 and beyond. What is the NPV of opening this new store if the appropriate discount rate is 4.0%?
On July 1, 2012, Watson Company received a $20,000 promissory note for services from Jeffs Company. The annual interest rate is 5%. Principal and interest are paid in cash at the maturity date of June 30, 2013. Assets decrease and owners' equity decr..
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often organizations enter the marketplace with one approach and model. as the economy and demands shift and technology
What is the advantage of using a composite indicator versus using a simple individual indicator? Please be clear and provide examples
Keiper, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2.85 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be wort..
How does lean maintenance differ from the traditional approach under which a maintenance department has the responsibility for all maintenance functions? Which level on the maintenance performance hierarchy would you expect to find a lean maintenance..
ABC Manufacturing Company makes baseball equipment. The company decides to issue a callable bond that it expects to sell for $820 per bond. If the bond is a twenty-year semi annual bond with a 8% coupon rate and a current yield to maturity of 9%, wha..
Corporation has current liabilities of $450,000.00, a quick ratio of 1.8, inventory turnover of 5.0, and a current ratio of 3.5. What is the cost of goods sold for the corporation?
Your firm is contemplating the purchase of a new $545,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worth $53,000 at the end of that time. You will save $295,000 before..
You are considering the purchase of Crown Bakery, Inc. common stock that just paid a dividend od $19.59 per share. You expect the dividend to grow at a rate of 1.04 percent per year, indefinitely. You estimate the rate of return od 12.18%, will be ad..
Netscrape Communications does not currently pay a dividend. You expect the company to begin paying a $4.2 per share dividend in 10 years, and you expect dividends to grow perpetually at 5.7 percent per year thereafter. If the discount rate is 13 perc..
The Up and Coming Corporation's common stock has a beta of 1.5. If the risk-free rate is 4 percent and the expected return on the market is 10 percent, what is the company's cost of equity capital?
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