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You have developed a new a new recreational tennis racket with tennis great Jimmy Connors. You have paid Jimmy Connors for his involvement in the project $250,000. The racket is state of the art and guaranteed to correct any backhand. You now need to decide if you want to proceed with mass marketing of this racket. You estimate the sales price of the new racket to be $400 per racket and sales volume to be 1,000 units in year 1, 1,250 units in year 2; and 1,325 units in year 3. The project has a three year life. Variable costs amount to $225 per unit and fixed costs are $100,000 per year. The project requires an initial investment of $165,000 in assets which will be depreciated straight line to zero over the three year project life. The actual market value of these assets at the end of year three is expected to be $35,000. NWC requirements at the beginning of each year will be 20 percent of the projected sales during the coming year. The tax rate is 34 percent and the required return on the project is 10 percent.
a) What will the annual incremental cash flows for the project be?
b) Using NPV analysis should the project be undertaken? Explain.
You are considering a job offer. The job offers an annual salary of $52,000, $55,000, and $60,000 a year for the next three years, respectively. The offer also includes a starting bonus of $2,000 payable immediately. What is this offer worth to you t..
Auditors often fail to detect financial fraud in companies they are auditing because the perpetrators have concealed the fraud well in a complex manner. What are the components that make a fraud complex? What role does collusion play in complex fraud..
Debt free life dream car $27,500, dream house $1,724,000, and dream job $72,000 per year. how long will it take you to save for the full price of your dream car using 5% of your monthly income in a money market that earns an average of 1.5%. How long..
Warrior Industries is planning to invest in a new development. The cost of the project will be $24,050,000 and is expected to generate cash flows of $14,000,000, $11,750,000, and $6,350,000 over the next three years. The company's required rate of re..
The price of a stock prior to a repurchase id 50.0 if the number of outstanding shares prior to a repurchase is 100,000 shares, how many shares were repurchased using $200000 cash?
question 1 we want to value a 2 year interest rate swap assuming the floating side is reset every three months while
Tyler Trucks stock has an annual return mean and standard deviation of 14 percent and 43 percent, respectively. Michael Moped Manufacturing stock has an annual return mean and standard deviation of 10 percent and 69 percent, respectively. Your portfo..
The current price of a non-dividend-paying stock is $30. Over the next six months it is expected to rise to $37 or fall to $25. Assume the risk-free rate is zero. An investor sells a call option with a strike price of $31 per share. How would the inv..
Proust Manufacturing Co. produces personal fitness machines. The once successful line is no longer selling well, so the company is considering production of a new improved cardio-vascular machine. This can be done by buying needed production equipmen..
Check out what percent of sales is spent on capital expenditures, and what the expenditures are for (investment in new areas? maintaining existing projects?)
Suppose a stock had an initial price of $64 per share, paid a dividend of $1.20 per share during the year, and had an ending share price of $73. Compute the percentage total return.
A call with a strike price of $60 costs $6. A put with the same strike price and expiration date costs $4. A trader creates a straddle by buying a call option and a put option, and holds it until maturity. For which of the following ranges of the sto..
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