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Better Mousetraps has developed a new trap. The company has already conducted a feasibility study at a cost of $100,000 to ensure that the new trap would work, and it has indicated no problem. It can go into production for an initial investment in equipment of $6 million. The equipment will be depreciated straight-line over 5 years to a book value of zero. The firm estimates variable costs equal to $1.50 per trap and believes that the traps can be sold for $4 each. The fixed costs are $300,000 per year. Financing costs for the project are $250,000 per year. Sales are expected to be 1 million traps per year. The project will come to an end in 5 years, when the equipment is expected to have a market value of $1 million. The project requires an immediate increase in inventory of $500,000, an increase in accounts receivable of $300,000, and an increase in accounts payable of $600,000. This investment in net working capital will be recovered at the end of the five years. The firm's tax bracket is 35%, and the cost of capital on the project is 12%. Please calculate the project's NPV and IRR. Conduct the scenario analysis of NPV to variable costs and unit sales, letting variable cost vary from $1.2 to $1.9 per trap in increments of $0.1 per trap and letting unit sales vary from 800,000 to 1,200,000 per year in increments of 100,000 units at the same time. At least how many traps need to be sold if the project breaks even on the NPV basis? In other words, at least how many traps need to be sold that makes the NPV of the project turns positive?
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(Actuarial Finance problem) Assuming that \lambda=0, m=86.34, and b=9.5 as GoMa parameters, compute the value and the duration of a deferred pension annuity purchased at age 62, under a valuation rate of r=5.5%, that pays $10,000 per year for life st..
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question 1 the following are the financial statements for hugo boss group for the financial years ending 2012 and
Inflation was 6% in the U.S and 2% in Germany, while during the same period of time the euro strengthened in nominal terms by 6% against the dollar. What happened to the real value of the euro (the $/euro exchange rate) during this period? The euros ..
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In the accumulation phase of the investor life cycle:
Halliford Corporation expects to have earnings this coming year of $2.63 per share. Halliford plans to retain all of its earnings for the next two years. For the subsequent two years, the firm will retain 49% of its earnings. It will then retain 23% ..
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