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Aria Acoustics, Inc. (AAI), projects unit sales for a new seven-octave voice emulation implant as follows: Year Unit Sales 1 90,000 2 103,000 3 117,000 4 112,000 5 93,000 Production of the implants will require $1,690,000 in net working capital to start and additional net working capital investments each year equal to 15 percent of the projected sales increase for the following year. Total fixed costs are $1,590,000 per year, variable production costs are $310 per unit, and the units are priced at $425 each. The equipment needed to begin production has an installed cost of $21,900,000. Because the implants are intended for professional singers, this equipment is considered industrial machinery and thus qualifies as seven-year MACRS property. In five years, this equipment can be sold for about 20 percent of its acquisition cost. AAI is in the 30 percent marginal tax bracket and has a required return on all its projects of 18 percent. MACRS schedule What is the NPV of the project?
collin macgibson president of on-time technology products just put you in charge of hiring a several new employees and
Cash Coverage, Inc. had net sales of $300,000 last year, and increased its retained earnings by $10,000 for the year after paying a dividend of $2 per share on 10,000 outstanding shares. The tax rate for the company is 40%. The company had cost of go..
Susan is beginning to plan college savings accounts for her two children. Her son Bobby is 8 and will begin college in 10 years when he turns 18. Her daughter Mallory is 2 and will begin college in 16 years when she is 18.
A brilliant young scientist is killed in a plane crash. It is anticipated that he could have earned $240,000 a year for the next 50 years. The attorney for the plaintiff’s estate argues that the lost income should be discounted back to the present at..
Reducing country risk. Explain some methods of reducing exposure to existing country risk, while maintaining the same amount of business within a particular country.
Calculate the price (per $100 par value), to three decimal places, of a three-year fixed-coupon bond paying a coupon rate of 9% pa if the bond pays coupons every half year. Assume that the bond is default-free and that a coupon has just been paid -- ..
Triad Corporation has established a joint venture with Tobacco Road Construction, Inc., to build a toll road in North Carolina. The initial investment in paving equipment is $80.1 million. The equipment will be fully depreciated using the straight-li..
Casino Inc. expects to pay a dividend of $3 per share at the end of year 1 (D1) and these dividends are expected to grow at a constant rate of 6% per year forever. If the required rate of return on the stock is 18%, what is the current value of the s..
The management of Jasper Equipment Company is planning to purchase a new milling machine that will cost $160,000 installed. The old milling machine has been fully depreciated but can be sold for $15,000. The new machine will be depreciated on a strai..
A project has cash flows of -$119,000, $52,800, $60,200, and $33,100 for years 0 to 3, respectively. The required rate of return is 12 percent. Based on the net present value of _____, you should _____ the project.
During periods of high inflation, U.S. firms have strong incentives to purchase short-lived assets and frequently replace them, rather than investing in long-lived assets. True, False, Uncertain and explain
The heuser company's currently outstanding bonds have a 10% coupon and a 12% yield to maturity. Heuser believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 35%, what is heuser's after-ta..
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