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After spending $3 million on research. The project requires an initial investment in plant and equipment of $6 million. This investment will be depreciated straight-line over five years to a value of zero, but, when the project comes to an end in five years, the equipment can in fact be sold for $500,000. The firm believes that working capital at each date must be maintained at 10% of next year's forecasted sales. Production costs are estimated at $1.50 per item and the item will be sold for $4 each. (There are no marketing expenses.) Sales forecasts are given in the following table. The firm pays tax at 35% and the required return on the project is 12%.
Year: 0 1 2 3 4 5
Sales (millions of traps) 0 .5 .6 1.0 1.0 .6
What is the project Modified Pay back period?
What is the project NPV?
What is the project IRR?
What is the project PI?
Should the project be accepted and what method did you base your judgment?
Mia is self employed as a consultant, During 2011, Mia earned $180,000 in self employment income. What is mia's self-employment tax?
Sales $15,000 Number of orders 160 Percent of orders marked rush .70 Calls to technical support 80 Required: Calculate the profitability of the Chester Company account.
LED Computer Electronics is planning an investment that will have cash flows of $5,000, $6,000, $7,000 and $10,000 for years one through four.
Suppose that the risk free rate of interest is 3 percent and the expected rate of return on the market is 9 percent. A share of stock is selling for $55 at the beginning of the year.
Why must a country's currency be devalued? What is failing in the economy?
During 1995, the yen went from $0.0095 to $0.0125. By how much did the dollar depreciate against the yen?
Suppose that $10,000 was invested in stock of General Medical Company with the intention of selling after one year. The stock pays no dividends, so entire return will be based on price of the stock when sold.
Computation net present value and payback period and draw the net present value profiles for both projects on the same set of axes
Calculate the after-tax cost of the Sony bond given David's tax bracket.
Savickas Petroleum's stock has a required return of 12%, and the stock sells for $40 per share.
Rose has preferred stock selling for 99 percent of par that pays a 9 percent annual coupon. What would be Rose's component cost of preferred stock?
Which is not a typical benefit of credit derivatives? (a) They make it easier to price other securities that have credit risk. (b) They may be designed for the diversification of credit risk away from other risks
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