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Another utilization of cash flow analysis is setting the bid price on a project. To calculate the bid price, we set the project NPV equal to zero and find the required price. Thus the bid price represents a financial break-even level for the project. Guthrie Enterprises needs someone to supply it with 140,000 cartons of machine screws per year to support its manufacturing needs over the next five years, and you've decided to bid on the contract. It will cost you $1,800,000 to install the equipment necessary to start production; you'll depreciate this cost straight-line to zero over the project's life. You estimate that in five years this equipment can be salvaged for $150,000. Your fixed production costs will be $265,000 per year, and your variable production costs should be $8.50 per carton. You also need an initial investment in net working capital of $130,000. If your tax rate is 35 percent and you require a 14 percent return on your investment, what bid price per carton should you submit?
How ratio analysis provides a meaningful comparison of a company to its industry, chief competitors, or to any other well run firm?
Round your answer to the nearest cent. Assume a 365-day year. Do not round your intermediate calculations.
LSI recently issued $195,000 of perpetual 9% debt and used the cash to do a stock repurchase. Earnings for LSI are anticipated to be $83,000 annually before interest and taxes.
If the dividend expected during the coming year, D1, is $2.00, and if g is a constant 2.75%, then at what price should Schuler's stock sell? Round your answer to the nearest cent.
Galt Industries has 50 million shares outstanding & market capitalization of $1.25 billion. It also has $750 million in debt outstanding. Galt Industries has announced to deliver company by issuing new equity & completely repaying all the outstanding..
Briefly describe the types of risks faced by investors in domestic bonds? Also indicate the additonal risks associated with nondomestic bonds.
The following retirement problem is often used to illustrate Significant aspects of savings and compound interest - see what you can learn by working the problem.
Discuss the taxation of one of the following: S Corp, C Corp, PSC, Sole Proprietor,LLP. Provide an advantage OR disadvantage. How could taxes be lessened?
Why is Amazon's cash cycle so much shorter than that of competitor Barnes & Noble? How does this comparison affect financial management decisions of other retailers?
Write down the the name of some problems which are associated with using the discounted cash flow technique of valuation.
A friend tells you that he has a job that pays US $1,500 every month; however, he is spending US $1,900 per month and taking on more credit card debt to meet his monthly bills.
Joan Messineo borrowed $15,000 at a 14 percent annual interest rate to be repaid over three years. The loan is amortized into three equal annual end-of-year payments.
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