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Your company has been approached to bid on a contract to sell 3,900 voice recognition (VR) computer keyboards a year for four years. Due to technological improvements, beyond that time they will be outdated and no sales will be possible. The equipment necessary for the production will cost $3.5 million and will be depreciated on a straight-line basis to a zero salvage value. Production will require an investment in net working capital of $92,000 to be returned at the end of the project, and the equipment can be sold for $272,000 at the end of production. Fixed costs are $637,000 per year, and variable costs are $152 per unit. In addition to the contract, you feel your company can sell 9,200, 10,100, 12,200, and 9,500 additional units to companies in other countries over the next four years, respectively, at a price of $295. This price is fixed. The tax rate is 30 percent, and the required return is 11 percent. Additionally, the president of the company will undertake the project only if it has an NPV of $100,000. What bid price should you set for the contract? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
The division managers of Chester Construction Corporation submit capital investment proposals each year for evaluation at the corporate level. Typically, the total dollar amount requested by the divisional managers far exceeds the company’s capital i..
All hedging relationships must be “highly effective” to qualify for special financial treatment. What is meant by the term highly effective and why is its measurement important for financial managers?
Calculate the annual cash flows (annuity payments) from a fixed-payment annuity if the present value of the 20-year annuity is $1.8 million and the annuity earns a guaranteed annual return of 10 percent. The payments are to begin at the end of the cu..
With the creation of the European Monetary System and the birth of the euro in 1999, the U.S dollar is facing challenges to its position as the key reserve currency in international financial transactions. Which countries are currently in the Euro zo..
Calculate the equity capital ration. If 2 billion in bad loans were removed from the bank's assets, show how the equity capital ratio would change.
Define efficient portfolios and efficient frontier assuming there are all risky assets in your portfolio. Draw a graph showing efficient portfolios and efficient frontier. How could an investor find an optimal (complete) portfolio?
Evans Co. showed long-term debt of $1.7M in 2005, and the December 31, 2006 balance sheet showed long-term debt of $1.9M. The 2006 income statement showed an interest expense of $650,000. What is the firm's cash flow to creditors in 2006?
Buying a home is the biggest single investment or purchase that most individuals make. This project is designed to give you some insight into the home-buying process and the associated costs. Find all the costs associated with buying a home by making..
Which of the following statements about financial statement analysis is(are) most correct? The current ratio measures liquidity.
A company currently pays a dividend of $2.0 per share. It is estimated that the company's dividend will grow at a rate of 20% per year for the next 4 years, and that the dividend will grow at a constant rate of 7% thereafter. What is your estimate of..
Your task is to analyze two mutually exclusive projects: Using the payback criterion, which investment should you chose? Why? Using the discounted payback criterion, which investment should you chose? Why? Using the NPV criterion, which investment sh..
The Yurdone Corporation wants to set up a private cemetery business. According to the CFO, Barry M. Deep, business is "looking up". As a result, the cemetery project will provide net cash inflow of $104,000 for the firm during the first year, and the..
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