You are considering starting a new factory producing small electric heaters. Each unit will sell at a price of $17. The production cost of each heater is $12. The fixed cost of production is $18000. This project has an economic life of 8 years. The project requires an investment of $185000 in plants and equipment. This equipment will be depreciated using a straight-line depreciation method to a salvage value of zero. The required rate of return for the project is 11 percent. The marginal corporate tax rate is 21 percent. Based on these assumptions, calculate the number of units of production at the net present value (financial) break-even point. O 11371.58 O 11485 O 11471.68 O 11215.37
Q: constant rate of 8 percent indefinitely. The beta of ABC stock is 1.0, the risk-free rate is 6…
A: Ans. To find out the intrinsic value of the ABC stock we need to follow dividend discounting model.…
Q: Two investments involving a virtual mold apparatus for producing dental crowns qualify for different…
A: Note:- According to bartleby guidelines , if question involves multiple sub parts , then 1st sub 3…
Q: If you buy a home with less than 20% down, you will pay an additional monthly fee, PMI (private…
A: The time period is 30 years: PMI is $259.17 The interest rate is 5% Mortgage balance is $278,000 To…
Q: Forecasting that uses subjective analysis of subjective inputs is called O Judgmental forecast…
A: Forecasting refers to the estimation of the outcomes in the future on the basis of the examination…
Q: An investment consists of a uniform series of 9 payments of $1,000 each at the end of the first year…
A: Payments at the end of each year = $1000 Term = 10 years Amount at the end of term (Future value of…
Q: Assuming a 100% stock transaction with a 20% offer premium and the following facts: Current Stock…
A: We have a possible acquisition through a pure share swap. We have to find the EPS accretion /…
Q: Suppose Intel stock has a beta of 0.88, whereas Boeing stock has a beta of 1.18. If the risk-free…
A: CAPM stands for capital asset pricing model. This model describes the relationship between expected…
Q: Determine how much is in each account on the basis of the indicated compounding after the specified…
A: initial Principal Value is 7200 The interest rate is 2.5% The time period is 1 year To Find:…
Q: ohen’s Bowling Emporium has a degree of financial leverage of 2.0 and a degree of combined leverage…
A: Operating leverage shows how much there would be change in operating income with change in the sales…
Q: Memphis Metro, a service-based firm that provides high-performance training for competitive junior…
A: Effective cost of credit on a bank facility is the cost including the interest expense and…
Q: Dominique is in the process of purchasing a new car. She can only afford monthly car payments up to…
A: CONCEPT. FV = A (1+r)n where , FV= future value A= principal r= interest rate n= time period.
Q: Suppose you own a call option on a stock with a strike price of $20 that expires today. The price of…
A: Call option gives the right to the owner of the option to buy an underlying asset at the price…
Q: Bill Blake pays a property tax of $2,500. In his community, the tax rate is 55 mills. What is Bill's…
A: Property tax = $2,500 Tax rate = 0.055 Bill's assessed value = ? 55 mills meaning 5.5 cents per…
Q: If I'm buying a car and I can only afford up to 600 for my monthly car payments but the dealer is…
A: Concept. Future value of annuity. FV = A { [ (1+r)n - 1] ÷ r} Where , FV = future value A = timely…
Q: Which investment will give you the higher future value in 5 years? Investment 1: You deposit $100…
A: Given: Given: Particulars Investment 1 Investment 2 Payment (PMT) $100 $300 Years 5 5…
Q: Please show all formulas and workings . No spreadsheet
A: As per our guidelines, we are supposed to answer only 3 sub-parts (if there are multiple sub-parts…
Q: Assume that both portfolios A and B are well diversified, that E(rA) = 21%, and E(rB) = 16%. If the…
A: concept. According to Capital asset pricing model (CAPM) , Er = Rf + β (Rm -Rf) where , Er =…
Q: 1. You are given the following information for a stock that has a lognormal distribution: • The…
A: We have the median stock price for 1 year and 5 years. We have to find the median stock price for…
Q: Conglomerate Inc. just announced that it plans to acquire Tiny Corp., by offering 0.75 shares of…
A: We have to come out with a strategy to exploit the arbitrage opportunity.
Q: To purchase a specialty guitar for his band, for the last year JJ Morrison has made payments of $98…
A: Payment per month for guitar is $98 The interest rate is 5.84% Compounded monthly The term of…
Q: Why would staff costs increase with increase in revenue?
A: We have to explain why staff costs would increase with increase in revenue.
Q: You are considering two job offers: a full-time permanent position that pays $65,000 annually and a…
A: Gross annual income refers to the income that is earned from the business operating activities.…
Q: The average monthly return for Cola Co. is%. (Round to two decimal places.)
A: Average monthly return is the mathematical average of all monthly returns given above. Rate of…
Q: I answred question 1 below butneed help with question 2. I've included my answer to question 1 since…
A: Concept. Net present value is calculated by deducting initial investment from present value of cash…
Q: Prepare an amortization schedule for the first 3 payments (in $) of a $66,000 mortgage at 5% for 20…
A: A mortgage is a loan that is taken out to purchase real estate. The real estate being purchased acts…
Q: 7 years ago, you founded your firm with $300,000 and 4 million shares. 5 years ago, you sold 1.5…
A: Value of shares is calculated as shown below. Value of shares=Per share price×Number of shares
Q: If an employee skims sales from a customer, which of the following will likely occur? a. The stolen…
A: Skimming sales is the unethical practice of theft of money from a debtor before the sales have been…
Q: A stock is selling for $32.70. The strike price on a put, maturing in one year, is $35. The possible…
A: The binomial pricing model is used to price options where the future price of the underlying stock…
Q: A P485,000 loan was originally made at a rate of 3% compounded semi- annually for 1 year. At the end…
A: A loan goes through two successive periods of different interest rates. We have to find the maturity…
Q: IDX Technology is a privately held developer of advanced security systems. As part of your business…
A: Discounted cash flow The cash that flows in and out of a project is known as its cash flow. When…
Q: You buy two January 2023 expiration call option on XYZ with an exercise price of $100 for $2 each.…
A: We have to graph the profit (loss) diagram for a strap position and then answer many questions.
Q: Assume that your firm had net income (earnings) this last year of $9,465,765.00 and had 2,280,907…
A: Return on equity refers to the measurement of the net income of the company divided by the number…
Q: YOU ARE PREPARED TO MAKE MONTHLY PAYMENTS OF 250 BEGINNING AT THE END OF THE MONTH INTO AN ACCOUNT…
A: Monthly payments of $250 The annuity type is Beginning of the month The interest rate is 8%…
Q: The Down and Out Co. just issued a dividend of $1.06 per share on its common stock. The company is…
A: Cost of equity is calculated using following equation Cost of equity = D0×1+gP0+g Where, D0 is…
Q: What is the maximum amount a firm should pay for a project that will return $18,200 annually for 5…
A: Initial outlay or initial investment must be atleast should be equal to the present value of cash…
Q: You currently have a loan outstanding on one of your investment properties. The current balance of…
A: We have to find the incremental cost of refinancing. For that we will have to find the incremental…
Q: 6. Mary is paid bi-weekly and she is currently 20 years old. Mary wants to have $500 at the end of…
A: A retirement plan refers to the investment to be made in the savings account that provides the…
Q: Sheridan Service has a line of credit loan with the bank. The initial loan balance was $7000.00.…
A: We have a loan account where payment and borrowing keeps happening. We need to find the balance when…
Q: te of the economy Probability T-Bills Phillips Pay -up Rubber-made Market Index Recession…
A: A stock that performs well irrespective of the state of overall stock market is termed as defensive…
Q: Suppose a savings account has a nominal rate of 3.83% and interest is compounded monthly. What is…
A: Effective annual rate is the rate of interest which will be calculated after considering of the…
Q: Consider two 30-year maturity bonds. Bond A has a coupon rate of 4%, while bond B has a coupon rate…
A: The time to maturity of bonds is 30 years The coupon rate of Bond A is 4% The coupon rate of Bond B…
Q: Kat receives ₱10,000.00 monthly starting on Mar. 2, 2023 until Feb. 2, 2024 as a cash gift from…
A: Present value of annuity With periodic interest rate (r), period (n) and periodic payment or annuity…
Q: You audited the financial statements of PIS Corp. for the first time in 2022. The company started…
A: P104,000, P140,000 and P160,000 in 2020, 2021, and 2022 - Income Prepaid insurance…
Q: Pena Company is considering an investment of $21,705 that provides net cash flows of $6,700 annually…
A: Capital budgeting techniques are those techniques which helps in making decisions.Net present value…
Q: entract can be fulfiled by pounded semi-annually? The payment is $ Round the final answer to the…
A: Annuity can be paid by the uniform and equal at the end of periods based on the interest rate and…
Q: Question 2: a. Find the net present value, b. interpret whether the NPV suggests you should accept…
A: Note:- according to bartleby guidelines , if question involves multiple sub parts , then 1 st sub…
Q: project has an initial cost of $65,000, expected net cash inflows of $14,000 per year for 9 years,…
A: PI that is profitability index is one of the capital budgeting and is based on the time value of…
Q: Commercial Hydronics is considering replacing one of its larger control devices. A new unit sells…
A: The process that helps an entity to evaluate the feasibility and profitability of any project or…
Q: 4. A loan of 12 000 euros with an interest rate of 4,5 % a year is compounded semi-annually. If 260…
A: A loan is an agreement between two parties where one party forwards an amount to the other party on…
Q: Cosmos Inc. is considering Projects S and L, whose cash flows are shown below. These projects are…
A: Year CFS CFL 0 $-2,050.00 $-4,300.00 1 $ 750.00 $ 1,500.00 2 $ 760.00 $ 1,518.00…
Step by step
Solved in 2 steps with 4 images
- Austins cell phone manufacturer wants to upgrade their product mix to encompass an exciting new feature on their cell phone. This would require a new high-tech machine. You are excited about his new project and are recommending the purchase to your board of directors. Here is the information you have compiled in order to complete this recommendation: According to the information, the project will last 10 years and require an initial investment of $800,000, depreciated with straight-line over the life of the project until the final value is zero. The firms tax rate is 30% and the required rate of return is 12%. You believe that the variable cost and sales volume may be as much as 10% higher or lower than the initial estimate. Your boss understands the risks but asks you to explain the alternatives in a brief memo to the board, Write a memo to the Board of Directors objectively weighing out the pros and cons of this project and make your recommendation(s).Friedman Company is considering installing a new IT system. The cost of the new system is estimated to be 2,250,000, but it would produce after-tax savings of 450,000 per year in labor costs. The estimated life of the new system is 10 years, with no salvage value expected. Intrigued by the possibility of saving 450,000 per year and having a more reliable information system, the president of Friedman has asked for an analysis of the projects economic viability. All capital projects are required to earn at least the firms cost of capital, which is 12 percent. Required: 1. Calculate the projects internal rate of return. Should the company acquire the new IT system? 2. Suppose that savings are less than claimed. Calculate the minimum annual cash savings that must be realized for the project to earn a rate equal to the firms cost of capital. Comment on the safety margin that exists, if any. 3. Suppose that the life of the IT system is overestimated by two years. Repeat Requirements 1 and 2 under this assumption. Comment on the usefulness of this information.New-Project Analysis The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer’s base price is $1,080,000, and it would cost another $22,500 to install it. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $605,000. The MACRS rates for the first 3 years are 0.3333, 0.4445, and 0.1481. The machine would require an increase in net working capital (inventory) of $15,500. The sprayer would not change revenues, but it is expected to save the firm $380,000 per year in before-tax operating costs, mainly labor. Campbell’s marginal tax rate is 35%. What is the Year-0 cash flow? What are the net operating cash flows in Years 1, 2, and 3? What is the additional Year-3 cash flow (i.e., the after-tax salvage and the return of working capital)? If the project’s cost of capital is 12%, should the machine be purchased?
- QUESTION 2 You are considering starting a new factory producing small electric heaters. Each unit will sell at a price of $65. The production cost of each heater is $50. The fixed cost of production is $58000. This project has an economic life of 11 years. The project requires an investment of $440000 in plants and equipment. This equipment will be depreciated using a straight line depreciation method to a salvage value of zero. The required rate of return for the project is 10.5 percent. The marginal corporate tax rate is 22 percent. Based on these assumptions, calculate the number of units of production at the accounting (net profit) break-even point. O 6133.33 O 6782.3 O 6533.33 O 6543QUESTION 4 You are considering starting a new factory producing small electric heaters. Each unit will sell at a price of $55. The production cost of each heater is $35. You are expecting to sell 9000 units per year. This project has an economic life of 6 years. The project requires an investment of $700000 in plants and equipment. This equipment will be depreciated to zero salvage value based on 5-year MACRS schedule. The depreciation rates from year 1 to 6 are 20 % , 32 %, 19.2 %, 11.52 %, 11.52 %, and 5.76 percent, respectively. The required rate of return for the project is 12 percent, the working capital requirement is 10 percent of the next year's sales revenue. The company will sell its old equipment for $100,000. The old machine is fully depreciated. The marginal corporate tax rate is 20 percent. At the termination of the project, the plant and equipment will be sold for an estimated value of $50000. Based on these assumptions, estimate the total cash flows for the project.…QUESTION 2 You are considering starting new factory producing small electric heaters. Each unit will sell at a price of $55. The production cost of each heater is $35. You are expecting to sell 9000 units per year. This project has an economic life of 6 years. The project requires an investment of $700000 in plants and equipment. This equipment will be depreciated to zero salvage value based on 5-year MACRS schedule. The depreciation rates from year 1 to 6 are 20 % ,32 %, 19.2 %, 11.52 %, 11.52 %, and 5.76 percent, respectively. The required rate of return for the project is 12 percent, the working capital requirement is 10 percent of the next year's sales revenue. The company will sell its old equipment for $100,000. The old machine is fully depreciated. The marginal corporate tax rate is 20 percent. At the termination of the project, the plant and equipment will be sold for an estimated value of $50000. Based on these assumptions, estimate the working capital requirements for the…
- QUESTION 3 You are considering starting a new factory producing small electric heaters. Each unit will sell at a price of $55. The production cost of each heater is $35. You are expecting to sell 9000 units per year. This project has an economic life of 6 years. The project requires an investment of $700000 in plants and equipment. This equipment will be depreciated to zero salvage value based on 5-year MACRS schedule. The depreciation rates from year 1 to 6 are 20 % ,32 %, 19.2 %, 11.52 %, 11.52 %, and 5.76 percent, respectively. The company will sell its old equipment for $100,000. The old machine is fully depreciated. The required rate of return for the project is 12 percent, the working capital requirement is 10 percent of the next year's sales revenue. The marginal corporate tax rate is 20 percent. At the termination of the project, the plant and equipment will be sold for an estimated value of $50000. Based on these assumptions, estimate the cash flow for capital expenditures.…QUESTION 2 You are considering starting a new factory producing small electric heaters. Each unit will sell at a price of $120. The production cost of each heater is $90. The fixed cost of production is $35000. You are expecting to sell 3000 units per year. This project has an economic life of 5 years. The project requires an investment of $125000 in plants and equipment. This equipment will be depreciated using a straight-line depreciation method to a salvage value of zero. The required rate of return for the project is 12 percent. The marginal corporate tax rate is 21 percent. Do a sensitivity analysis using different numbers of production units. Assume that number of units can be between 2400 and 3750 units. What is the minimum net present value based on the range of units expected to be sold?QUESTION 5 You are considering starting a new factory producing small electric heaters. Each unit will sell at a price of $55. The production cost of each heater is $35. You are expecting to sell 9000 units per year. This project has an economic life of 6 years. The project requires an investment of $700000 in plants and equipment. This equipment will be depreciated to zero salvage value based on 5-year MACRS schedule. The depreciation rates from year 1 to 6 are 20 % ,32 %, 19.2 %, 11.52 %, 11.52 %, and 5.76 percent, respectively. The required rate of return for the project is 12 percent, the working capital requirement is 10 percent of the next year's sales revenue. The company will sell its old equipment for $100,000. The old machine is fully depreciated. The marginal corporate tax rate is 20 percent. At the termination of the project, the plant and equipment will be sold for an estimated value of $50000. Based on these assumptions, estimate the net present value of the project.
- QUESTION 4 You are considering starting a new factory producing small electric heaters. Each unit will sell at a price of $125. The production cost of each heater is $110. The fixed cost of production is $45000. You are expecting to sell 10500 units per year. This project has an economic life of 9 years. The project requires an investment of $555000 in plants and equipment. This equipment will be depreciated using a straight line depreciation method to a salvage value of zero. The required rate of return for the project is 8 percent. The marginal corporate tax rate is 21 percent. Based on these assumptions, calculate the degree of operating leverage (DOL)? 3.4 O 3.1 O 3.2 3.3QUESTION 6 You are considering starting a new factory producing small electric heaters. Each unit will sell at a price of $55. The production cost of each heater is $35. You are expecting to sell 9000 units per year. This project has an economic life of 6 years. The project requires an investment of $700000 in plants and equipment. This equipment will be depreciated to zero salvage value based on 5-year MACRS schedule. The depreciation rates from year 1 to 6 are 20 %,32 %, 19.2 %, 11.52 %, 11.52 %, and 5.76 percent, respectively. The required rate of return for the project is 12 percent, the working capital requirement is 10 percent of the next year's sales revenue. The company will sell its old equipment for $100,000. The old machine is fully depreciated. The marginal corporate tax rate is 20 percent. At the termination of the project, the plant and equipment will be sold for an estimated value of $50000. Based on these assumptions, estimate the internal rate of return for this…QUESTION 8 You are considering starting a new factory producing small electric heaters. Each unit will sell at a price of $120. The production cost of each heater is $90. The fixed cost of production is $35000. This project has an economic life of 5 years. The project requires an investment of $125000 in plants and equipment. This equipment will be depreciated using a straight line depreciation method to a salvage value of zero. The required rate of return for the project is 12 percent. The marginal corporate tax rate is 21 percent. Based on these assumptions, calculate the number of units at the operating cash flow break-even point.