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McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $760 per set and have a variable cost of $320 per set. The company has spent $126,000 for a marketing study that determined the company will sell 24,000 sets per year for seven years. The marketing study also determined that the company will lose sales of 5,000 sets of its high-priced clubs. The high-priced clubs sell at $1,220 and have variable costs of $620. The company will also increase sales of its cheap clubs by 4,000 sets. The cheap clubs sell for $420 and have variable costs of $150 per set. The fixed costs each year will be $8,400,000. The company has also spent $1,176,000 on research and development for the new clubs. The plant and equipment required will cost $24,000,000 and will be depreciated on a straight-line basis. The new clubs will also require an increase in net working capital of $1,105,000 that will be returned at the end of the project. The tax rate is 40 percent, and the cost of capital is 9 percent.
Suppose you feel that the values are accurate to within only ±6 percent. The best-case NPV is ____________ $ and worst-case NPV is __________________ $. (Do not include the dollar signs ($). Negative amount should be indicated by a minus sign. Round your answers to 2 decimal places. (e.g., 32.16)) (Hint: The price and variable costs for the two existing sets of clubs are known with certainty; only the sales gained or lost are uncertain.)
Consolidated Pasta is currently expected to pay annual dividends of $10 a share in perpetuity on the 2.8 million shares that are outstanding. Shareholders require a 8% rate of return from Consolidated stock. What is the total market value of its equi..
Two of the major investment markets in the United States are the New York Stock Exchange and NASDAQ. Explain the major differences between the two, including a discussion of how you would use each to purchase investments.
A house painting business had revenues of $17,300 and expenses of $10,300. There were no depreciation expenses and no taxes. However, the business reported the following changes in working capital: Calculate net cash flow for the business for this pe..
GCC Corporation is planning to issue bonds with warrants. Which of the following events/actions would decrease the chance that GCC warrants will be exercised, other things held constant?
In what instances would an investor want to "best the market" and "hold the market"? Discuss the strategies for each and their dependence on an investor's information and trading skills.
Microsoft currently has 21 long-term bond issues outstanding with various times-to-maturity and coupon rates. One of these bonds matures on June 1, 2039, approximately 25 years from today. The bond is currently selling for $1,153.06, based on a face ..
You find a zero coupon bond with a par value of $10,000 and 18 years to maturity. The yield to maturity on this bond is 5 percent. Assume semiannual compounding periods. What is the price of the bond?
Vitronix Corporation's net worth exceeds $160 million, its stock is publicly traded, and a national CPA firm audits its financial statements. Wilson Corporation's net worth also exceeds $160 million. However, it is closely held by members of the Wils..
He also wants to understand if you think the creation of the financial products exacerbated the credit crisis of 2007 (use at least two examples) and the likely impact on the credibility of the ABS market of the investment firms' activities
Which of the following is NOT a cash flow from operating activities. Which of the following is NOT a cash flow from investing activities? Which of the following is NOT a cash flow from operating activities
The Blue Bird Company plans a $79 million expansion. The expansion is to be financed by selling $50 million in new debt and $29 million in new common stock. The before tax required rate of return on debt is 5% and the required rate of return on equit..
The Aggie Company has EBIT of $50,000 and market value debt of $100,000 outstanding with a 9% coupon rate. The cost of equity for an all equity firm would be 14%. Aggie has a 35% corporate tax rate. Investors face a 20% tax rate on debt receipts and ..
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