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You are considering adding a new software title to those published by your highly successful software company. If you add the new product, it will use capacity on your disk duplicating machines that you had planned on using for your flagship product, “Battlin’ Bobby.” You had planned on using the unused capacity to start selling “BB” on the west coast in two years. You would eventually have had to purchase additional duplicating machines 10 years from today, but using the capacity for your new product will require moving this purchase up to 2 years from today. If the new machines will cost $109,000 and will be depreciated straight-line over a 5-year period to a zero salvage value, your marginal tax rate is 30 percent, and your cost of capital is 14 percent, what is the opportunity cost associated with using the unused capacity for the new product? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.) Opportunity cost $
Suppose you invest $ 2,026 today to start a business. In 4 years you hope to sell this company for $ 8,865. What would be your annualized rate of return? Assume that, starting next year, you put $ 662 into a savings account that pays 9 % interest eve..
Everything we do in a business environment is done with a strategic purpose. Your taking this course is to complete a degree program and better your opportunities for career advancement. At least for most of you. For others it might be purely persona..
Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 12 percent, and that the maximum allowable payback and discounted payback statistic for the pr..
Suppose XG is considering an expansion which it will finance through additional bond sales. Current outstanding XG bonds are selling for $1,148.77. These have a face value of $1,000, and a coupon of 8% and 10 years to maturity. If interest is paid se..
Morrison Tobacco Co. just paid a dividend of $3.11 per share. The company is in a state of decline, decreasing its dividend by 20 percent next year, 15% the year after that, 10% the year following until it reaches the industry average of -5 percent d..
You want to buy a house for $185.000. The bank will loan you 85% of the purchase price. The mortgage terms are "30 years, monthly payments, and 9% annual interest rate.' Given this information, how much will your monthly payments be?
Based on the information below, calculate the weighted average cost of capital. Great corporation has the following situation. Debt. One thousand bonds were issuers ago at a coupon rate. They had 25 year-terms1,00 face value now selling to yield.
Ford Motors expects a new hybrid-engine project to produce incremental cash flows of $74 each year and expects these to grow at a rate of 0.05 each year. The upfront project costs are $559 and Ford's weighted average cost of capital is 0.07. If the i..
Essex Biochemical Co. has a $1,000 par value bond outstanding that pays 15 percent annual interest. The current yield to maturity on such bonds in the market is 17 percent. Use Appendix B and Appendix D for an approximate answer but calculate your fi..
Required rate of return Stock R has a beta of 1.3, Stock S has a beta of 0.6, the expected rate of return on an average stock is 12%, and the risk-free rate of return is 7%. By how much does the required return on the riskier stock exceed the require..
Larry Davis borrows $80,000 at 14 percent interest toward the purchase of a home. His mortgage is for 25 years. How much will his annual payments be? How much interest will he pay over the life of the loan?
Create the amortization spreadsheet and answer the following questions for a $350,000 15-year fixed-rate, constant-payment mortgage loan that is partiallyamortizing with a balloon payment of $100,000. What is the APR (annual percentage rate) on the l..
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