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Company XYZ has spent $250,000 to develop a new product – smart beehive. The company has spent $24,000 for a market research for figuring out the expected demand for the beehives. Company XYZ can manufacture the beehives for $2200 each in variable costs. Fixed costs are estimated to be $1.2 million per year. The estimated sales volume is 2000, 2400, 2800, 3400, and 3400 units per year for the next five years, respectively. The unit price of the beehive will be $3900. The necessary equipment for producing the beehives can be purchased for $8.2 million and will be depreciated on a seven-year MACRS schedule. It is believed the value of the equipment in five years will be $1.4 million. The need for the net working capital for producing the beehives will be 20 percent of next years sales. Company XYZ has a 35 percent corporate tax rate and a 12 percent required return
QUESTIONS
1. What is the payback period of the project?
2. What is the profitability index of the project?
3. What is the IRR of the project?
4. What is the NPV of the project?
McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $732 per set and have a variable cost of $362 per set. The company has spent $152,000 for a marketing study that determined the company will sell 75,200 sets per year ..
Using the church financial policies and best financial practice, prepare a financial policy for ABC church including the establishment of bank account and expense procedure.
Dr Fog E. Professor is retiring and wants to endow a chair of engineering economics at his university. It is expected that he will need to cover an annual cost of $100,000 forever. What lump sum must he donate to the university today if the endowment..
You bought one of Great White Shark Repellant Co.’s 8 percent coupon bonds one year ago for $1,030. These bonds make annual payments and mature 14 years from now. Suppose you decide to sell your bonds today, when the required return on the bonds is 7..
Heavy Duty Company, a manufactured of power tools, decides to offer a rebate of $130 on its 16-inch mid-range chain saw, which currently has a retail price $490. The profit margin for Heavy Duty before the rebate is $180. Based on the information, is..
Rowan Company has a net profit margin of 8.3 percent, debt ratio of 58 percent, total assets of $5,106,200, sales of $6,663,600, and a dividend payout ratio of 62 percent. What will the firm’s new net profit margin have to be in order to achieve the ..
Suppose that a machine can be purchased for $10,000. This machine will save the firm $6,000 per year over its useful life of five years regardless of whether it is purchased or leased. Assume straight-line depreciation and a tax rate of 34%. The mach..
(Stock dividends) In the spring of 2014 the CFO of Placebo Pharmaceuticals, Inc. took a proposal to the firm's board of directors to distribute a noncash dividend to the firm's shareholders in the form of new shares of common stock. After paying the ..
A-Rod Fishing Supplies had sales of $2,840,000 and cost of goods sold of $1,760,000. Selling and administrative expenses represented 16 percent of sales. Depreciation was 8 percent of the total assets of $4,420,000. What was the firm’s operating prof..
Discussion Forum No unread replies. No replies. Research Methods Instructions A local pizza maker is considering changing its cheese from mozzarella to a provolone/mozzarella cheese mix in a 1:2 ratio or, alternatively, a 2:1 ratio. This pizza maker ..
An asset used in a four-year project falls in the five-year MACRS class for tax purposes. The asset has an acquisition cost of $6,080,000 and will be sold for $1,280,000 at the end of the project. If the tax rate is 35 percent, what is the after tax ..
Identify each of the following as a “direct tax,” an “indirect tax,” or something else:
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