Sparkling Water, Inc., expects to sell 3.7 million bottles of drinking watereach year in perpetuity. This year each bottle will sell for $1.46 in real termsand will cost $.82 in real terms. Sales income and costs occur at year-end.Revenues will rise at a real rate of 1.3 percent annually, while real costs willrise at a real rate of 1.2 percent annually. The real discount rate is 8 percent.The corporate tax rate is 25 percent.What is the company worth today?

Variables in the question:No. of bottles expected to be sold each year in perpetuity=3.7…

Answered: Sparkling Water, Inc., expects to sell…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

See similar textbooks

Similar questions

Sparkling Water, Incorporated, expects to sell 3.7 million bottles of drinking water each year in perpetuity. This year each bottle will sell for $1.46 in real terms and will cost $.82 in real terms. Sales income and costs occur at year-end. Revenues will rise at a real rate of 1.5 percent annually, while real costs will rise at a real rate of .9 percent annually. The real discount rate is 6 percent. The corporate tax rate is 23 percent. What is the company worth today? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.) Value of the firm :______________
Sparkling Water, Incorporated, expects to sell 3.7 million bottles of drinking water each year in perpetuity. This year each bottle will sell for $1.46 in real terms and will cost $.82 in real terms. Sales income and costs occur at year-end. Revenues will rise at a real rate of 1.3 percent annually, while real costs will rise at a real rate of 1.2 percent annually. The real discount rate is 8 percent. The corporate tax rate is 23 percent. What is the company worth today? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.)
Sparkling Water Ltd, expects to sell 8 million bottles of drinking water each year inperpetuity. This year each bottle will sell for 3.25 cedis in real terms and will cost 1.80 cedisin real terms. Sales income and costs occur at year end. Revenues will rise at real rate of 10%annually, while real costs will rise at real rate of 10% annually. The real discount rate is 20%.The corporate tax rate is 25%. What is Sparkling worth today.
You own a company. This company’s projected revenue is $30,000 for year 1, $31,000 for year 2, and $32,000 for year 3. From the 4th year onwards, revenue is expected to be 5% higher than the previous year. Assume the appropriate nominal discount rate is 8%, and all revenue is collected at the end of each year.Determine the present value of your sales revenue for the first 15 years, round to 2 decimal places.
You own a company. This company’s projected revenue is $30,000 for year 1, $31,000 for year 2, and $32,000 for year 3. From the 4th year onwards, revenue is expected to be 5% higher than the previous year. Assume the appropriate nominal discount rate is 8%, and all revenue is collected at the end of each year. Determine the present value of your sales revenue for the first 15 years, round to 2 decimal places. [show the step by step of how to find each result]
A supermarket wants to allocate 1.25% as a bounce to reward the hardworking employees from the total that will be made annually. The sales are expected to be ($350,320) in the first year and ($362,320) in the second year. The amount increases each year is 6% for the coming 12 years. If the interest rate was 8% per year, what is the equivalent annual worth of this bonus in years 1 to 14? Provide the cashflow diagram
Your company estimates it will have to replace a piece of equipment at a cost of P5,800,000 in 5 years. To do this a sinking fund is established by making equal monthly payments at the beginning of each month into an account paying 6.6% compounded monthly. How much should each payment be?
Your company will generate $82,000 in annual revenue each year for the next six years from a new information database. If the appropriate discount rate is 10.75 percent, what is the present value?
Monroe Corporation is considering the purchase of new equipment. The equipment will cost $35,000 today. However, due to its greater operating capacity, Monroe expects the new equipment to earn additional revenues of $5,000 by the end of each year for the next 10 years. Assuming a discount rate of 10% compounded annually, determine whether Monroe should make the purchase.
Coronado Excavating Inc. is purchasing a bulldozer. The equipment has a price of $107,400. The manufacturer has offered a payment plan that would allow Coronado to make 10 equal annual payments of $17,500.00, with the first payment due one year after the purchase. How much total interest will Coronado pay on this payment plan? Coronadocould borrow $107,400 from its bank to finance the purchase at an annual rate of 9%. Should Coronado borrow from the bank or use the manufacturer's payment plan to pay for the equipment?
Allegience Insurance Company’s management is considering an advertising program that would require an initial expenditure of $177,085 and bring in additional sales over the next five years. The projected additional sales revenue in year 1 is $82,000, with associated expenses of $28,500. The additional sales revenue and expenses from the advertising program are projected to increase by 10 percent each year. Allegience’s tax rate is 30 percent. (Hint: The $177,085 advertising cost is an expense.)Required:1. Compute the payback period for the advertising program.2. Calculate the advertising program’s net present value, assuming an after-tax hurdle rate of 10 percent. (Round your intermediate calculations and final answer to the nearest whole dollar.)
Hurkin Manufacturing Company pays accounts payable on the tenth day after purchase. The average collection period is 30 days, and the average age of inventory is 40 days. The firm currently has annual sales of about $18 million and purchases of $14 million. The firm is considering a plan that would stretch its accounts payable by 20 days. If the firm pays 12% per year for its resource investment, what annual savings can it realize by this plan? Assume a 360- day year.

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS