P7.1 (LO 2, 3), AP Rustix, a company that makes new furniture that has a worn look to it, has been struggling to keep up with its competitors. But Igor has an idea: make some upfront investments in order to get customers' attention and then reap the rewards of a better product with a higher selling price. Since he's been studying capital budgeting at school, he's confident that he can present his idea and impress his boss with his insight and technical expertise. Here's the plan: • Invest $150,000 in updated equipment and inventory management technology to support the production of zero-defect products, where custom features can be reasonably added to any order on demand. • It will have a useful life of 8 years, after which it will have no market value. • It will generate additional net cash inflows due to higher gross margins of $60,000 per year for the life of the asset, less additional operating cash outflows of $30,000 per year for persistent marketing efforts. Before pulling his proposal together, Igor finds out that the company is typically subject to a 24% tax rate. Fur- ther, the company has alternative uses for its cash that would easily earn a 6% rate of return. Required a. Is Igor's plan financially viable? Determine the NPV of this proposal and explain what it means if your answer is a negative or positive amount. b. Determine the exact IRR for this investment. Would Igor's proposal be acceptable to his boss based on this metric? c. What would the IRR of this investment be if the company actually generated $85,000 in additional net cash inflows for the last 4 years of its life (instead of the $60,000 noted above)? Does this scenario seem

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You are looking for security for your business. Your firm does highly confidential work so you absolutely must have security. You have found two options. The first option is a high tech solution with door sensors, motion detectors, cameras and card readers for door access. The second option is rather low tech. You would upgrade your door locks and hire a guard to be on duty overnight. The costs for each of these options is shown below. If your cost of capital is 8% which option should you select? Support your answer with the appropriate discounted cash flow analysis. Upfront CostAnnual CostLength of ContractHi Tech$200000$   8,0007Low Tech$ 10,000$ 50,0003

Can you help me answer this with a step by step explanation and display any formulas used.? There is a firm, which we are prospecting as a purchase candidate. It has the following features we find attractive. First, it will enable us to sell to the clients of this firm what we already are selling our existing clients. The revenue addition will be $12 million. However, it will induce $3 million more expenses in attaining that higher level of revenue. Secondly, it will enable us to sell a division of the firm that does not rally connect with our operations for $5 million. Thirdly, since there is a lot of repetition of positions ( we are in the same line of business) we can lay off 50 employees permanently. The average salary of those employees is $60,000. The coc of the firm is 10%. Calculate the amount that we can bid to acquire this company.

During the past few years, Super Technologies has been too constrained by the high cost of capital to make many capital investments.  Recently, though, capital costs have been declining and the company has decided to look seriously at a major expansion program that had been proposed by the marketing department.  As the assistant to the financial vice-president, it is your task is to estimate Super’s weighted average cost of capital (WACC).  The VP has provided you with the following information:   The firms’ tax rate is 40%.             The current market price of Super’s outstanding bonds is $1,153.72.  The bonds have an annual coupon rate of 12% and make coupon payments semiannually.  The bonds mature in 15 years and have a par value of $1,000.             The current price of the firm’s preferred stock is $113.10 per share.  The stock has a $100 par value and a 10% annual dividend rate (paid annually).             The current price of the firm’s common stock is $50 per share.…