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ELC Electrical Services is considering the construction of a plant to manufacture a new energy saving device for small offices. The company recently commissioned a $100,000, two-year study to assess the market demand for the proposed product. It estimated that 30,000 units of its new product could be sold annually over the next 10 years at a price of $10,000 each. Subcontractors would install each device at a cost of $6,200 per installation.
The project involves an initial outlay of $60 million to build production facilities and $4 million in land. The $60 million facility will be depreciated using the prime cost method over the project’s life (fully depreciated at the end of the project). Fixed costs of $12 million per annum will be incurred. The facilities, including the land will be sold for an estimated value of $15 million at the end of the project. The land value is assumed to stay constant throughout the lifespan of the project.
The company is an ongoing profitable business and pays taxes at a 30% rate in the year of income. It uses a 15% per year discount rate on the new project. Using the NPV approach, determine whether the project should be undertaken (use the relevant tax rate in your analysis).
LilyMac Studios, a national chain of photography studios, is considering opening up a chain of coffee shop/art galleries. While the existing operations of the firm have a beta of 1.17, the new chain is expected to have a beta of 0.8. The expected mar..
what overall net income would be produced if the admission rate of the capitated group were reduced from the commercial
Alden Trucking Company is replacing part of their fleet of trucks by purchasing them under a note agreement with Kenworthy on January 1, 2014. Alden financed $39,052,588, and the note agreement will require $10.04 million in annual payments starting ..
Rocking Motors Inc manufactures motorized wheel chairs. The average selling price for the various units is $500. The associated costs is $300 per unit. Fixed costs for the firm average $180,000 annually. Company has $1,000,000 debt paying 12% interes..
Find at least two articles from the ProQuest database that highlight and discuss two of the biggest challenges facing financial managers today.
If the required materials to be purchased are 18,000 pounds, the production needs are three times the direct materials purchases, and the beginning direct materials are three and a half times the direct materials purchases, what are the desired endin..
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What types of bank liabilities generate the highest servicing costs? What types generate the highest acquisition costs?
Biogenetics Corporation has a target capital structure of 55 percent equity. The firm just paid dividends of $1.5 per share and dividends are expected to growth at 10 percent a year. The company president has approached you about the company capital ..
You purchase a 7 percent $1,000 bond with a term of ten years and reinvest all interest payments. If interest rates rise to 10 percent after you purchase the bond what is the return on your investment in the bond?
A company calculates its discretionary financing needed and determines this amount of capital cannot be raised at a reasonable cost. Which of the following would reduce the amount of discretionary financing needed?
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