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McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $720 per set and have a variable cost of $240 per set. The company has spent $144,000 for a marketing study that determined the company will sell 19,000 sets per year for seven years. The marketing study also determined that the company will lose sales of 5,000 sets of its high-priced clubs. The high-priced clubs sell at $1,210 and have variable costs of $660. The company will also increase sales of its cheap clubs by 3,000 sets. The cheap clubs sell for $470 and have variable costs of $150 per set. The fixed costs each year will be $7,220,000. The company has also spent $939,000 on research and development for the new clubs. The plant and equipment required will cost $19,000,000 and will be depreciated on a straight-line basis. The new clubs will also require an increase in net working capital of $883,000 that will be returned at the end of the project. The tax rate is 34 percent, and the cost of capital is 14 percent.Suppose you feel that the values are accurate to within only ±9 percent.
The best-case NPV ? Round 2 decimal places please
worst-case NPV? Round 2 decimal places please
(Hint: The price and variable costs for the two existing sets of clubs are known with certainty; only the sales gained or lost are uncertain.)
Sweet Fruit, Inc. has a $1000 par value bond that is currently selling for $1280. It has an annual coupon rate of 9.90 percent, paid semi annually, and has 10-years remaining until maturity. What would the annual yield to maturity be on the bond if y..
The rates of return by security classes shown in the slide deck on Risk and Return, titled "Average Annual Returns and Risk Premiums: 1926-2010, is strong evidence that investors generally are:
A factory costs $800,000. You reckon that it will produce an inflow after operating costs of $170,000 a year for 10 years. If the opportunity cost of capital is 14%, what is the net present value (NPV) of the factory?
You find a certain stock that had returns of 13 percent, −12 percent, 25 percent, and 21 percent for four of the last five years. The average return of the stock over this period was 12.16 percent. What was the stock’s return for the missing year?
You must evaluate a proposed spectrometer for the R&D department. The base price is $110,000, and it would cost another $27,500 to modify the equipment for special use by the firm. What are the project's annual cash flows in Years 1, 2, and 3? Round ..
1.how firms estimate their cost of capital the wacc for a firm is 13.00 percent. you know that the firmrsquos cost of
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Brighton Corp. bought an oil rig exactly 6 years ago for $109,000,000. Brighton depreciates oil rigs straight line over 10 years assuming no salvage value. The rig was just sold to British Petroleum for $34,000,000. What Capital Gain/Loss will Bright..
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Explain why collateral alone does not justify extending credit. Cite examples, using real estate or agricultural products as collateral.
On Oct 10, 2015, gold on the spot market is at $1,000 an ounce. A forward gold contract for delivery of gold on Oct 10, 2016 is priced at $1,030. Three months pass and spot gold is still at $1,000. What should be the approximate price of the Oct 10, ..
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