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A bicycle manufacturer currently produces258 comma 000258,000units a year and expects output levels to remain steady in the future. It buys chains from an outside supplier at a price of$ 1.90$1.90a chain. The plant manager believes that it would be cheaper to make these chains rather than buy them. Direct? in-house production costs are estimated to be only$ 1.50$1.50per chain. T
he necessary machinery would cost$ 221 comma 000$221,000and would be obsolete after ten years. This investment could be depreciated to zero for tax purposes using a? ten-year straight-line depreciation schedule. The plant manager estimates that the operation would require additional working capital of$ 23 comma 000$23,000but argues that this sum can be ignored since it is recoverable at the end of the ten years. Expected proceeds from scrapping the machinery after ten years are$ 16 comma 575$16,575.
If the company pays tax at a rate of35 %35%and the opportunity cost of capital is15 %15%?,what is the net present value of the decision to produce the chains? in-house instead of purchasing them from the? supplier?
Project the annual free cash flows FCF of buying the chains. The annual free cash flows for years 1-10 of buying the chains is $___ ?
The Wildcat Oil Company is trying to decide whether to lease or buy a new computer-assisted drilling system for its oil exploration business. Management has decided that it must use the system to stay competitive; it will provide $1.9 million in annu..
If the demand for U.S. exports falls because of a change in foreign tastes, what will happen to the exchange rate?
The preferred stock of gator industries sells for $35.86 and pays $2.72 per year in dividends. what is the cost of preferred stock financing? if gator were to issue 483,000 more preferred shares just like the ones it currently has outstanding.
how you manage your cash or money on a day-to-day basis will impact whether your long-term financial objectives will be
You are considering a new product launch. The project will cost $1,700,000, have a four-year life, and have no salvage value; depreciation is straight-line to zero. Sales are projected at 140 units per year; price per unit will be $22,000, variable c..
StepCo Inc. has a market value equal to its book value. Currently the firm has excess cash of $990 and other assets of $10,010. Equity is worth $11,000. The firm has 500 shares of stock outstanding. Stepco Inc. is going to use all of its excess cash ..
Describe the consumption-smoothing benefits and moral hazard costs of coverage for contact lenses, prescription drugs, and accidents and acute illnesses.
Horizon Telecom sold $300,000 worth of 120-day commercial paper for $298,000. What is the dollar amount of interest paid on the commercial paper? What is the effective 120-day rate on the paper?
When Renee was living, she and Luke each bought a life insurance policy at the birth of their first child. They used the multiple-of-earnings approach to determine how much life insurance to purchase. what would the present value of Renee's life insu..
Would this condition be satisfied if the number of waiting customers is a Poisson random variable with a mean of 5? Justify your answer with appropriate calculations.
Your company is considering a new project that will require $767,000 of new equipment at the start of the project. The equipment will have a depreciable life of 8 years and will be depreciated to a book value of $143,000 using straight-line depreciat..
Rust Pipe Co. was established in 1994. Four years later, the company went public. At that time, Robert Rust, the original owner, decided to establish two classes of stock. The first represents Class A founders' stock and is entitled to eleven votes p..
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