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You are evaluating a project for your company. You estimate the sales price to be $590 per unit and sales volume to be 2,900 units in year 1; 3,900 units in year 2; and 2,400 units in year 3. The project has a three-year life. Variable costs amount to $390 per unit and fixed costs are $245,000 per year. The project requires an initial investment of $370,000 in assets which will be depreciated straight-line to zero over the three-year project life. The actual market value of these assets at the end of year 3 is expected to be $59,000. NWC requirements at the beginning of each year will be approximately 30 percent of the projected sales during the coming year. The tax rate is 35 percent and the required return on the project is 8 percent. What change in NWC occurs at the end of year 1?
Milo has the following inventory data: Assuming that a periodic inventory system is used, what is the amount allocated to ending inventory on a LIFO basis
The project requires and initial outlay of $1,000,000. It is expected to generate net cash in-flows of $250,000 for the next five years. At the end of five years, Timmy will retire and the equipment will be sold for $500,000 (terminal value). The zoo..
You own a portfolio that has $2,100 invested in Stock A and $3,050 invested in Stock B. If the expected returns on these stocks are 10 percent and 14 percent, respectively, what is the expected return on the portfolio? (Do not round your intermediate..
You purchased a 5-year annual-interest coupon bond 1 year ago. Its coupon interest rate was 6%, and its par value was $1,000. At the time you purchased the bond, the yield to maturity was 4%. If you sold the bond after receiving the first interest pa..
You have a portfolio which has an average return of 10.3 percent. In any given year, you have a 2.5 percent probability of earning either a zero or a negative annual return. What is the approximate standard deviation of your portfolio?
Monarch Machines sponsors a 15% money purchase pension plan and 401(k) profit sharing plan in which the employees are permitted to defer up to 75% of their compensation. Monarch Machines matches employee deferral contributions 100% up to 6% of deferr..
Explain the advantages and disadvantages to entering into a forward contract, and how you make or lose money by taking a naked position on one. Discuss issues of liquidity and your ability to tailor the contract to your needs in terms of delivery dat..
Your task is to analyze two mutually exclusive projects: Using the payback criterion, which investment should you chose? Why? Using the discounted payback criterion, which investment should you chose? Why? Using the NPV criterion, which investment sh..
Two credit cards both state an APR of 10%. First National Bank’s card charges 0.8333% compounded monthly. First United Bank’s card charges 5% compounded semiannually (twice a year). Given these APR’s, what are the effective annual rates charged by th..
Hanover Tech is currently an all equity firm that has 320,000 shares of stock outstanding with a market price of $19 a share. The current cost of equity is 15.4 percent and the tax rate is 36 percent. First get the value of the unlevered firm. Then c..
A sailboat costs $28,867. You pay 2-% down payment and amortize the rest with eqaul monthly payment over a 9-yr period. If you must pay 6.9% compound monthly, What is your monthly payment? How much interest will you pay?
Magnus Credit Corp. wants to earn an effective annual return on its consumer loans of 17.75 percent per year. The bank uses daily compounding on its loans. What interest rate is the bank required by law to report to potential borrowers?
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