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McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $900 per set and have a variable cost of $500 per set. The company has spent $159, 000 for a marketing study that determined the company will sell 55, 000 sets per year for seven years. The marketing study also determined that the company will lose sales of 11, 000 sets of its high-priced clubs. The high-priced clubs sell at $1, 190 and have variable costs of S790. The company will also increase sales of its cheap clubs by 11, 500 sets. The cheap clubs sell for $530 and have variable costs of $275 per set. The fixed costs each year will be $9, 190, 000. The company has also spent $1, 200, 000 on research and development for the new clubs. The plant and equipment required will cost $29, 330, 000 and will be depreciated on a straight-line basis. The new clubs will also require an increase in net working capital of $1, 390, 000 that will be returned at the end of the project. The tax rate is 40 percent, and the cost of capital is 12 percent. Suppose you feel that the values are accurate to within only plusminus 10 percent. What are the best-case and worst-case NPVs? (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
Now to switch things up just a bit; sometimes things aren't always what they seem. Sometimes a firm will issue an RFP with no intention of actually having a contractor complete the work.If you are a potential seller, how can you effectively respond t..
Assume that on 1/1/12 you purchased an investment for $3000. The investment pays you $200 on 12/31 of every year that you hold the security. On 1/1/17 you sell the investment for $3500. What is your rate of return? Round your answer to the nearest te..
What kinds of financial information exist in various places? What is the difference between information found on the Internet and other sources of information?
The current price of a non-dividend-paying stock is $40. Over the next six months it is expected to rise to $42 or fall to $37. An investor buys put options with a strike price of $41. The risk-free interest rate is 2% per annum with continuous compo..
On January 2d, 2014, Microsoft expects to ship 1,000,000 new X-Boxes from its US plant, which it will sell through EU dealers on 270-day terms at 250 Euro each. So Microsoft will receive payment from its dealers on September 28th, 2014.
Discuss (worldwide), which countries were the largest recipient and source countries of FDI last year? Why? How would you use this knowledge as a global leader?
ABC Corp. is considering expansion of its production capacity by investing in a project with the following unlevered cash flows (UCF): Year 0: -$30 million Year 1: +$10 million Year 2: +$8 million Year 3 and all future years: +$5 million ABC Corp.
. Assume a $250,000 investment and the following cash flows for two products. Year Product X Product Y 1 $ 90,000 $ 50,000 2 90,000 80,000 3 60,000 60,000 4 20,000 70,000 a. Calculate the payback for products X and Y.
You are evaluating two different silicon wafer milling machines. The Techron I costs $271,500, has a three-year life, and has pretax operating costs of $45,100 per year. The Techron II costs $372,500, has a five-year life, and has pretax operating co..
Assume that the daily volatilities of both assets are 1% and that the coefficient of correlation between their returns is 0.3. What is the 5-day 99% VaR for the portfolio?
The December 31, 2013, balance sheet of Maria’s Tennis Shop, Inc., showed current assets of $1,115 and current liabilities of $920. The December 31, 2014, balance sheet showed current assets of $1,330 and current liabilities of $1,005. What was the c..
Suppose there is an interest rate spread of 1% between the United States and South Africa (S.A.). The yield on a one-year U.S. Treasury security is 5% (rd = 5%) while the yield on a comparable South African security is 6% (rF = 6%). You wish to inves..
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