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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 79,000 2 92,000 3 106,000 4 101,000 5 82,000 Production of the implants will require $1,580,000 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 $1,480,000 per year, variable production costs are $255 per unit, and the units are priced at $370 each. The equipment needed to begin production has an installed cost of $20,800,000. 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 35 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? What is the IRR?
The firm estimates the revenues and expenses for the new and the old lathes to be as shown in the following table. The firm is subject to a 40% tax rate. Should the new lathe be purchased?
Use the following information on states of the economy and stock returns to calculate the standard deviation of returns. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your re..
Both Bond Sam and Bond Dave have 6 percent coupons, make semiannual payments, and are priced at par value. Bond Sam has four years to maturity, whereas Bond Dave has 19 years to maturity. If interest rates suddenly rise by 2 percent, what is the perc..
Central Systems, Inc. has a weighted average cost of capital of 8 percent. The firm has an after-tax cost of debt of 4 percent and a cost of equity of 12 percent. What is the firm's debt-equity ratio?
An electric utility is considering a new power plant in northern Arizona. Power from the plant would be sold in the Phoenix area, where it is badly needed. Because the firm has received a permit, the plant would be legal; but it would cause some air ..
Bond rating agencies have invested significant sums of money in an effort to determine which quantitative and non-quantitative factors best predict bond defaults. To recoup those costs, some bond rating agencies have tied their ratings to the purchas..
A firm had a ledger balance of $4,122 with no outstanding deposits or checks. Today, your firm deposited 4 checks in the amount of $466 each and wrote a check in the amount of $969. What is the amount of the collection float as of the end of the day?
Travis invested $9,250 in an account that pays 6 percent simple interest. How much more could he have earned over a 7-year period if the interest had compounded annually?
A common stock was held for 2 years during which time total dividends of $20 were paid. The stock was sold for $100. What was the purchase price of the stock if the total rate of return for the period was 32%?
The dividend of Quarry, Inc. is currently $4 per share and is expected to grow at 5 percent per year forever. Its share price is $60. Its beta is 1.30. The market risk premium is 6 percent and the risk free rate is 4 percent.
An asset used in a four-year project falls in the five-year MACRS class (MACRS Table) for tax purposes. The asset has an acquisition cost of $8,900,000 and will be sold for $1,930,000 at the end of the project. Required: If the tax rate is 30 percent..
Compute the payback statistic for Project A and recommend whether the firm should accept or reject the project with the cash flows shown below if the appropriate cost of capital is 8 percent and the maximum allowable payback is four years.
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