User Account

All Pages

Production facilities to build new line of sewing kits

Assignment Help Financial Management
Reference no: EM131346511

Needle and Thread Inc. is considering expanding one of its production facilities to build a new line of sewing kits. The project would require a $9,000,000 capital investment and will be fully depreciated (straight-line) over its 3 year life. They believe they can salvage $300,000 for the equipment at that time.

Incremental sales are expected to be $10,000,000 annually for the 3 year period with costs (excluding depreciation) of 42%. The company would also have to commit initial working capital to the project of $1,000,000. The company has a 36% tax rate.

The project cash flow for Year 0 is -$10,000,000; Year 1 is $4,792,000; Year 2 is $4,792,000; and Year 3 is $5,984,000 now SHOW YOUR WORK...HOW DID WE ARRIVE AT THIS FIGURES FOR EACH YEAR? SHOW IN WORKSHEET OR EXCEL; HOWEVER, SHOW YOUR WORK TO GET CREDIT FOR YOUR ANSWER:

Reference no: EM131346511

Questions Cloud

Compute the revenue-sales price and net sale volume variance : Assume that Casio Computer Company, LTD. sells handheld communication devices for $110 during August as a back-to-school special. The normal selling price is $160. The standard variable cost for each device is $60. Compute the revenue, sales price, s..
About causes and effects of financial crisis : Write a Summary ( Short Report ) about Causes and Effects of financial crisis in 2008
What is contained in residential mortgage credit report : What is contained in a residential mortgage credit report? Suppose a commercial property loan application has a debt coverage ratio of 0.95. what does this say about the proprty's ability to cover its debt service payments? What are key areas that bu..
Investment bank has the financing outstanding : The Saunders Investment Bank has the following financing outstanding. Debt: 120,000 bonds with a coupon rate of 8 percent and a current price quote of 110.0; the bonds have 20 years to maturity. 290,000 zero coupon bonds with a price quote of 17.5 an..
Production facilities to build new line of sewing kits : Needle and Thread Inc. is considering expanding one of its production facilities to build a new line of sewing kits. The project would require a $9,000,000 capital investment and will be fully depreciated (straight-line) over its 3 year life. They be..
What would be the bonds value : Your firm, Nurse International has identified investments for your hospital in long term, fixed income bonds. Your boss is expecting you to complete a comprehensive, analytical, response to this project. Suppose that two years after the bonds were is..
Initial cost company would be willing to pay for project : Och, Inc., is considering a project that will result in initial aftertax cash savings of $1.85 million at the end of the first year, and these savings will grow at a rate of 3 percent per year indefinitely. What is the maximum initial cost the compan..
Company capital structure weights on book value basis : Filer Manufacturing has 5 million shares of common stock outstanding. The current share price is $71, and the book value per share is $6. The company also has two bond issues outstanding. What are the company's capital structure weights on a book val..
Calculate deci-bells degree of operating leverage : Deci-bell inc. is producing new headphones, but first management wants to determine its degree of operating leverage. Deci-Bell Inc. has a base level of sales of $350,200 units. Sales price per unit is $167.65 and variable cost per unit is $69.09. To..

Reviews

Write a Review

Financial Management Questions & Answers

  What is the pre-tax cost of debt

Aspen's Distributors has a cost of equity of 13.84% and an unlevered cost of capital of 12%. The company has $5,000 in debt that is selling at par value. The levered value of the firm is $12,000 and the tax rate is 34%. What is the pre-tax cost of de..

  Forest and landscape of a large tract of public land

The National Park Service is considering two plans for rejuvenating the forest and landscape of a large tract of public land. The study period is indefinitely long, and the Park Service's MARR is 9% per year. You have been asked to compare the two pl..

  Determine net effect of the plan on blawnoxs pretax profits

The Blawnox Company is concerned about its bad-debt losses and the length of time required to collect receivables. - Determine the net effect of this plan on Blawnox's pretax profits.

  The growth rate in dividends is expected to be constant

Bayou Okra Farms just paid a dividend of $3.35 on its stock. The growth rate in dividends is expected to be a constant 4 percent per year indefinitely. Investors require a return of 16 percent for the first three years, a return of 14 percent for the..

  What is the value of the NPV for this project

Howell Petroleum is considering a new project that complements its existing business. The machine required for the project costs $3.99 million. The marketing department predicts that sales related to the project will be $2.69 million per year for the..

  Market is a chain of retail stores

Roger's Meat Market is a chain of retail stores that limits its sales to fresh-cut meats. The stores have been very profitable in northern cities. However, when two stores were opened in the south, both lost money and had to be closed. Roger, the own..

  Outstanding preferred stock issue with par value

TXS Manufacturing has an outstanding preferred stock issue with a par value of $67 per share. The preferred shares pay dividends annually at a rate of 11%. What is the annual dividend on TXS preferred stock? If investors require a rate of return of 7..

  Common stock is greater than cost of common stock

Firms in stable industries are advised to keep debt levels very low so that shareholders, rather than creditors, receive the benefits of steady cash flows. Although the after-tax cost of debt is below the cost of equity, firms cannot increase their u..

  Derive transport cost per pallet as a function of shipment

Derive the transport cost per pallet as a function of shipment size for the case where one or two trailers are used.

  Using equity to finance the better of the two alternatives

Project WACC Using Corporate Financing Pearson Electronics manufactures printed circuit boards used in a wide variety of applications ranging from automobiles to washing machines. In fall 2014, it considered whether to invest in two major projects. H..

  The divorce settlement stipulated

Patricia and Joe Payne are divorced. The divorce settlement stipulated that Joe pay $500 a month for their daughter Suzanne until she turns 18 in 4 years. Interest is 12% a year. How much must Joe set aside today to meet the settlement?

  What is the current dividend per share

Suppose you know that a company’s stock currently sells for $51 per share and the required return on the stock is 11 percent. You also know that the total return on the stock is evenly divided between a capital gains yield and a dividend yield. If it..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd