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Aunt Sally’s Foods, Inc. is a full line producer and distributor of ready to use jarred food products such as gravies and sauces. Their products are well received in the marketplace competing with such brand names as Franco-American, Ragu and Heinz. Consider the following expansion opportunity for Aunt Sally’s Foods, Inc. Sally is considering expansion into a new line of all natural, cholesterol free, low sodium, low-calorie tomato sauces. Sally has paid $100,000 for a marketing study to assist in this and other potential valuations. The study indicates that the new product will have sales of $1,900,000 per year for each of the next 6 years. However, existing product line sales will be reduced by $200,000 per year. Manufacturing plant and equipment will cost $1,100,000 and will be depreciated on the straight-line method with a 10% market value (salvage value) at the end of 6 years. Annual fixed costs are projected at $160,000 per year and variable costs are projected at 55% of sales. Also, an initial working capital outlay of $175,000 will be required which will be recaptured at the end of the 6 years. Sally’s tax rate is 30% and the firm requires an 18% return. Based on the following criteria: 1) Net Present Value, and 2) Internal Rate of Return, should Sally undertake this project? (Please round to the nearest dollar on all calculations)
A pension fund manager decides to invest a total of at most $45 million in U.S. Treasury bonds paying 5% annual interest and in mutual funds paying 9% annual interest. He plans to invest at least $5 million in bonds and at least $ 10 million in mutua..
What is the value of a stock currently paying a dividend of $1.50 that is growing annually at 8% when investors require a rate of return of 12%?
If the investor company owns 30% of the stock of the investee company and the investee company reports profits of $ 150,000, then the investor company reports equity income of
Within the context of forecasting, which of the following ratios best links the income statement to the balance sheet?
Seven years ago, Goodwynn & Wolf Incorporated sold a 20-year bond issue with a 14% annual coupon rate and a 9% call premium. Today, G&W called the bonds. The bonds originally were sold at their face value of $1,000. Compute the realized rate of retur..
Peabody Energy plans to issue a convertible bond in the near future. The bond will pay a $1,000 maturity value in exactly 30 years. The coupon rate will be 1 percent (with a semiannual coupon, of course). The TRACE reporting system is a reliable sour..
A hostile takeover is the main method of transferring ownership interest in a corporation. Unlimited liability and limited life are two key advantages of the corporate form over other forms of business organization. A corporation is a legal entity th..
Calculate the expected return of your portfolio. Calculate the portfolio beta. Given the information above, plot the security market line on paper. Plot the shares from your portfolio on your graph.
How would I find the cost of a break even analysis for a gym and if it was reasonable for them to add a smart phone application?
Rate of Return if State Occurs State of Probability of Economy State of Economy Stock A Stock B Stock C Boom 0.60 0.08 0.16 0.34 Bust 0.40 0.18 0.08 − 0.07 a. What is the expected return on an equally weighted portfolio of these three stocks?
Team Sports has 6 million shares of common stock outstanding, 1 million shares of preferred stock outstanding, and 200 thousand bonds ($1,000 par). If the common shares are selling for $24.50 per share, the preferred share are selling for $20 per sha..
In the past, Sunnyfax Publishing paid out all its dividends as earnings. When the stock market opened for trading today, Sunnyfax’s share price was $38 and earnings for the year ending today are $3 per share. If the reinvestment does not affect Sunny..
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