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Your firm will produce widgets for the next 10 years (starting at t=1). Annual revenue from
selling widgets is $20,000. Production requires an initial outlay (at t=0) for machinery of $50,000, and
involves annual expenses for labor and raw materials of $3,000. In addition, the operation requires the firmto hold a certain amount of inventory. It is estimated that the level of inventory required is 10% of annualsales. You will need to build up this level of inventory before you start the project (i.e., at t=0). Themachinery will last 10 years and have zero salvage value. Any remaining assets of the firm will be
liquidated at the end of the ten years. Assume that the firm uses straight-line depreciation over the life ofthe equipment, pays 40% tax, and that all cash flows occur at the end of the year.
a) Calculate the after-tax operating cash flows for this firm
b) With an 8% WACC, what is the NPV of the project? Should you undertake it?
In June, Leslie wins a cash prize of $2,000. She plans to use this money to pay her tuition bill in September. Leslie puts this money in a savings a savings account because her mai
when is an econometric model said to be simple and naive
A firm manufactures and sells a product that has the following demand function: Q = 180 - 4P where P is price, Q is quantity. It also faces the following
Factor that affect the volume of production
if there is multicollinearity so why we can not estimate the value of parameters?
Consider a linear model to explain pricing of houses: Price = ß0 + ß1lotsize + ß2sqrft + ß3bdrms + u (1) E(u| lotsize, sqrft, bdrms)=0 Var (u| lotsize, sqrft, bdrms)=s2 lotsize4
Replicate the estimations in Table 2 on page 82 of Graddy (1995), but excluding the data of King Whiting.
DISCUSS THE CENTRAL ECONOMIC PROBLEM FACING THIS GROUP OF SURVIVORS
Can you draw a line which starts from left to right has a positive slope?
how weather affect the change in supply?
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