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You are evaluating a project for The Ultimate recreational tennis racket, guaranteed to correct that wimpy backhand. You estimate the sales price of The Ultimate to be $420 per unit 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 3-year life. Variable costs amount to $235 per unit and fixed costs are $100,000 per year. The project requires an initial investment of $171,000 in assets, which will be depreciated straight-line to zero over the 3-year project life. The actual market value of these assets at the end of year 3 is expected to be $37,000. NWC requirements at the beginning of each year will be approximately 20 percent of the projected sales during the coming year. The tax rate is 30 percent and the required return on the project is 12 percent. (Use SL depreciation table)
What will the cash flows for this project be?
Fly Away, Inc., has balance sheet equity of $5.5 million. At the same time, the income statement shows net income of $803,000. The company paid dividends of $445,665 and has 100,000 shares of stock outstanding. If the benchmark PE ratio is 19, what i..
Gugenheim, Inc. offers a 7.25 percent coupon bond with annual payments. The yield to maturity is 4.025 percent and the maturity date is 10 years. What is the market price of a $1,000 face value bond?
Suppose you own 2,000 common shares of a firm. The EPS is $10, the DPS is $3.00 and the stock sells for $80. The firm announces a 2 for 1 split. Immediately after the split, how many shares will you have? What will be the adjusted EPS and DPS and, wh..
Suppose a 25mm new venture has a 50% chance of success or failure. Success is 10mm per year perpetual earnings and failure is 8mm per year perpetual losses. The discount rate is 10%. What is the NPV for each scenario? What is the simple expected NPV?..
Network Communications has total assets of $1,500,000 and current assists of $612,000. It turns over its fixed assists three times a year. It has $319,000 of debt. Its return on sales is 8 percent. What is its return on stockholders’ equity?
A call with a strike price of $70 costs $7.71. A put with the same strike price and expiration date costs $4.39. If you create a straddle, what is the initial cash flow? If it's a cash outflow, answer in a negative number.
Marsha is ready to start a business that will generate about 150k of earnings each year. Marsha will work full time for the business. Her plan is to withdraw 100k of earnings from the biz each year. What will be the total entity and personal tax cost..
The total return on a bond during a given year is based only on the coupon interest payments received. All else equal, a bond that has a coupon rate of 10% will sell at a discount if the required return for bonds of similar risk is 8%. The price of a..
The discounted payback as compared to the payback method will
Pangbourne Whit church has preferred stock outstanding. The stock pays a dividend of $8 per share, and sells for $40. What is the percentage cost of the preferred stock?
Big steve's makers of swizzle tickets is considering the purchase of a new plastic stamping machine. This investment requires an initial outlay of $110,000 nd will generate net cash inflows of $16,000 per year for 8 years. What is the projected NPV u..
Which of the following conditions must hold true for eth constant growth valuation formula to be useful and give meaningful results?
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