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Consider a project to supply 60,800,000 postage stamps to the U.S. Postal Service for the next 5 years. You have an idle parcel of land available that cost $760,000 five years ago; if the land were sold today, it would net you $912,000, aftertax. The land can be sold for $1,500,000 after taxes in 5 years. You will need to install $2,356,000 in new manufacturing plant and equipment to actually produce the stamps; this plant and equipment will be depreciated straight-line to zero over the project's 5-year life. The equipment can be sold for $456,000 at the end of the project. You will also need $469,000 in initial net working capital for the project, and an additional investment of $38,000 in every year thereafter. All net working capital will be recovered when the project ends. Your production costs are 0.38 cents per stamp, and you have fixed costs of $608,000 per year. Your tax rate is 31 percent and your required return on this project is 11 percent. What bid price per stamp should you submit?
Present an example of a business situation that you believe would lend itself to the use of a quantitative business model. Clearly explain how the model could be used in this situation.
Capital Structure- Kirsten Neal is interested in purchasing a new house given that mortgage rates are at a historical low. Her bank has specified rules regarding an applicant’s ability to meet the contractual payments associated with the requested de..
Stock X has an expected return of 0.08. It has a beta estimated at 1, a risk-free rate of 0.03 and a risk premium of 6.4. Its variance of returns is 0.0029. All returns here are expressed as decimals, not percentages. What is its coefficient of varia..
Night Shades Inc. (NSI) manufactures biotech sunglasses. The variable materials cost is $10.60 per unit, and the variable labor cost is $5.90 per unit. What is the variable cost per unit? Suppose NSI incurs fixed costs of $580,000 during a year in wh..
A bond pays an annual coupon of $86 has a face value of $1,000 and has 6 years remaining until maturity. If the current market required rate of return on bonds of this type is 10% what is the market price of the bond?
Willie Wilson plans to borrow $32,562 at the beginning of each of his 5 years of college. He will repay the loan in 16 equal annual instalments at the end of each year starting one year after he graduates. If the interest rate is 9.74%, how large wil..
Mickelson Corporation will pay a dividend of $2.74 per share next year. The company pledges to increase its dividend by 6 percent per year indefinitely. If you require a return of 12 percent on your investment, how much will you pay for the company’s..
adding debt will increase the firms ROE as long as the cost of debt is less than their basic earning power. the level of debt does not affect the business risk of a firm. if a company increases its level of debt, then its net income will increase
How would you calculate the present value of the cash flow below for operating costs if they were inflation-adjusted dollars?
Two alternative investment proposals are under consideration for a vacant owner by Urban Development Corporation. Plan A would require an immediate investment of $120,000 and first-year expenditure for property taxes, maintenance, and insurance of $4..
Client maintains a website, theme being lifestyles for individuals (an information center on recreation, quality of life, dining, theatre, etc.) Client's customer base are restaurants, playhouses. etc. The service they provide to their clientele is a..
Use the following quotes for JC Penney stock options: Picture Picture Assume you purchased the right to sell 4,400 shares of JC Penney stock in January 2013 at a strike price of $25 per share. Suppose the stock sells for $23.82 per share immediately ..
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