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Yeatman Co. is considering an investment that will have the following sales, variable costs, and fixed operating costs: Year 1 Year 2 Year 3 Year 4 Unit Sales 5,500 5,200 5,700 5,820 Sale price $42.57 $43.55 $44.76 $46.79 Variable cost per unit $22.83 $22.97 $23.45 $23.87 Fixed Operating costs except depreciation $66,750 $68,950 $69,690 $68,900 Accelerated Depreciation Rate 33% 45% 15% 7% The project will require an investment of $25,000 in new equipment but no investment is needed in its net operating working capital. The equipment will have a salvage value of $2,000 at the end of the project's 4-year life. Yeatman pays a constant tax rate of 40%, and the MACRS Depreciation is used. What is the FCF in year 4? What is the project's NPV if the WACC is 11%? What would be the project's NPV if straight-line depreciation is used? Assume the book value at the end of year 4 is 0 but the salvage value (market value) will still be $2,000. How much should Yeatman reduce the NPV of this project if it discovered that this project would reduce one of its division's net after-tax CFs by $400 for each year of the four-year project?
Stock in Cheezy-Poofs Manufacturing is currently priced at $50 per share. A call option with a $50 strike and 90 days to maturity is quoted at $2.50. Compare the percentage gains and losses from a $12,500 investment in the stock versus the option in ..
Tyler Trucks stock has an annual return mean and standard deviation of 12 percent and 41 percent, respectively. Michael Moped Manufacturing stock has an annual return mean and standard deviation of 23.0 percent and 67 percent, respectively. What is t..
Assume that you contribute $230 per month to a retirement plan for 20 years. Then you are able to increase the contribution to $460 per month for another 30 years. Given a 7 percent interest rate, what is the value of your retirement plan after the 5..
A project currently generates sales of $12 million, variable costs equal 40% of sales, and fixed costs are $2.4 million. The firm’s tax rate is 40%. Assume all sales and expenses are cash items. What are the effects on cash flow, if sales increase fr..
Assume that interest rates exhibit an unexpected increase of 1%, in general, we would expect bond prices to ________. However, we would likely see that the price change of ________ time-to-maturity bonds be greater than the price chan..
A company using activity based pricing marks up the direct cost of goods by 0.28 plus charges customers for indirect costs based on the activities utilized by the customer. Indirect costs are charged as follows: $7.60 per order placed; $2.30. per sep..
A 4-year bond with a 6.50% coupon and a 9.50% yield to maturity is currently worth $903.87, how much will it be worth 1 year from now if interest rates are constant?
Nungesser Corporation's outstanding bonds have a $1,000 par value, a 11% semi-annual coupon, 7 years to maturity, and an 10.5% YTM. What is the bond's price? Round your answer to the nearest cent
A stock has an expected return of 15.5 percent, a beta of 1.50, and the expected return on the market is 12.1 percent. What must the risk-free rate be?
Are there any instances in which companies should not pay dividends? How do dividends impact the value of a share of stock? What are some of the most important risks associated with bonds?
You decided to buy Treasury bill futures contracts with a quoted price was 96-50. When you close this position, the quoted price was 95-25. Determine the profit or loss per contract, ignoring transaction costs.
Pronet has an annual sale of $724 million from its 600 retail stores. Pronet can reduce its mail float by 2 days through the use of wire transfers. The annual cost of the wire transfers is expected to be $105,610. If Pronet's cost of short term funds..
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