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Merton Shovel Corporation has decided to bid for a contract to supply shovels to the Honduran Army. The Honduran Army intends to buy 1, 200 shovels per year for the next 3 years. To supply these shovels, Merton will have to acquire manufacturing equipment at a cost of $199,000. This equipment will be depreciated on a straight line basis over its five year lifetime. At the end of the third year, Merton can sell the equipment for exactly its book value ($79, 600). Additional fixed costs will be $37,000 per year, and variable costs will he $2 per shovel. An additional investment of $22,000 in net working capital will be required when the project is initialed. This investment will be recovered at the end of the third year. Merton Shovel has a 35 percent marginal tax rate and a 15 percent required rate of return on the project. What is the lowest possible per shovel price that Merton can offer for the contract and still create value for its stockholders? (Do not round intermediate calculations. Round final answer to 2 decimal places, e.g. 15.25.) Shovel price $
Your first budget-priced condo that you purchase sells for $30,000. Your loan is for 30 years and is at an interest rate of 8% per year. What will be monthly payment (also commonly called the Principal and Interest, or P&I) be? What part of that paym..
You have $21,072.44 in a brokerage account, and you plan to deposit an additional $6,000 at the end of every future year until your account totals $210,000. You expect to earn 11% annually on the account. How many years will it take to reach your goa..
Suppose the real risk-free rate is 3.00%, the average expected future inflation rate is 6.20%, and a maturity risk premium of 0.10% per year to maturity applies, i.e., MRP = 0.10%(t), where t is the years to maturity. What rate of return would you ex..
Even though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere often have annual coupon payments. Suppose a German company issues a bond with a par value of €1,000, 25 years to maturity, and a coupon r..
The treasurer of a large corporation wants to invest $33 million in excess short-term cash in a particular money market investment. The prospectus quotes the instrument at a true yield of 4.21 percent; that is, the EAR for this investment is 4.21 per..
A current price of a stock is $22 and the end of one year its price will be either $27 or $17. The annual risk free rate is 6.0% based on daily compounding. A 1-year call option on the stock with an exercise price of $22 is available. Based on the bi..
What is a lower bound for the price of a four-month call option on a non-dividend-paying stock
Jesse can invest the lump sum at 8%, or she can invest the annual payments at 6%. Which should she choose for the greatest return after 20 years?
How does the present value of lump sum compare to present value of annuity? How does future value of ordinary annuity compare to the future value of annuity due
Stanton Corp. began operations on January 1, 2014. The statement of cash flows for the first year reported dividends paid of $166,000. The balance sheet at the end of the first year reported $52,000 in dividends payable and $486,000 in ending retaine..
Of the five levels in Maslow’s hierarchy of needs, which is satisfied by offering a salary? By offering healthcare benefits? By offering training opportunities? By developing flexible job descriptions?
A few years ago, Michael Tucker purchased a home for $134000. Today the home is worth $172000. His remaining mortgage balance is $61000. Assuming Michael can borrow up to 68 percent of the market value of his home, what is the maximum amount he can b..
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