Corporate Finance
12th Edition
ISBN: 9781259918940
Author: Ross, Stephen A.
Publisher: Mcgraw-hill Education,
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Chapter 3, Problem 19QAP
Summary Introduction
To compute: Maximum increase in sales before adding new assets.
Introduction: Investors invest in bonds to ensure regular income (interest income) on their investments. Bondholders are the investors who are risk averse.
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Students have asked these similar questions
Gandi Mfg., Inc., is currently operating at only 80% fixed asset capacity. Current sales are
$610,000. How fast sales can grow before any new fixed asset are needed?
а. 30%
b. 40%
c. 25%
d. 15%
Net Present Value Method
Opulence Corporation operates several large cruise ships. One of these ships, the Bellwether, can hold up to 2,300 passengers and cost $460 million to build. Assume the following additional information:
There will be 300 cruise days per year operated at a full capacity of 2,300 passengers.
The variable expenses per passenger are estimated to be $85 per cruise day.
The revenue per passenger is expected to be $425 per cruise day.
The fixed expenses for running the ship, other than depreciation, are estimated to be $60,996,000 per year.
The ship has a service life of 10 years, with a residual value of $70,000,000 at the end of 10 years.
Present Value of $1 at Compound Interest
Year
6%
10%
12%
15%
20%
1
0.943
0.909
0.893
0.870
0.833
2
0.890
0.826
0.797
0.756
0.694
3
0.840
0.751
0.712
0.658
0.579
4
0.792
0.683
0.636
0.572
0.482
5
0.747
0.621
0.567
0.497
0.402
6
0.705
0.564
0.507
0.432
0.335
7
0.665
0.513
0.452
0.376
0.279
8
0.627
0.467…
Net Present Value Method
Opulence Corporation operates several large cruise ships. One of these ships, the Bellwether, can hold up to 2,300 passengers and cost $460 million to build. Assume the following additional information:
There will be 300 cruise days per year operated at a full capacity of 2,300 passengers.
The variable expenses per passenger are estimated to be $70 per cruise day.
The revenue per passenger is expected to be $350 per cruise day.
The fixed expenses for running the ship, other than depreciation, are estimated to be $50,232,000 per year.
The ship has a service life of 10 years, with a residual value of $70,000,000 at the end of 10 years.
Present Value of $1 at Compound Interest
Year
6%
10%
12%
15%
20%
1
0.943
0.909
0.893
0.870
0.833
2
0.890
0.826
0.797
0.756
0.694
3
0.840
0.751
0.712
0.658
0.579
4
0.792
0.683
0.636
0.572
0.482
5
0.747
0.621
0.567
0.497
0.402
6
0.705
0.564
0.507
0.432
0.335
7
0.665
0.513
0.452
0.376
0.279
8
0.627
0.467…
Chapter 3 Solutions
Corporate Finance
Ch. 3 - Financial Ratio Analysis A financial ratio by...Ch. 3 - Industry-Specific Ratios So-called same-store...Ch. 3 - Sales Forecast Why do you think most long-term...Ch. 3 - Sustainable Growth In the chapter, we used...Ch. 3 - EFN and Growth Rate Broslofski Co. maintains a...Ch. 3 - Common-Size Financials One tool of financial...Ch. 3 - Asset Utilization and EFN One of the implicit...Ch. 3 - Comparing ROE and ROA Both ROA and ROE measure...Ch. 3 - Ratio Analysis Consider the ratio EBITD/Assets....Ch. 3 - Return on Investment A ratio that is becoming more...
Ch. 3 - Use the following information to answer the next...Ch. 3 - Prob. 12CQCh. 3 - Use the following information to answer the next...Ch. 3 - Use the following information to answer the next...Ch. 3 - Use the following information to answer the next...Ch. 3 - DuPont Identity If Muenster, Inc., has an equity...Ch. 3 - Equity Multiplier and Return on Equity Synovec...Ch. 3 - Prob. 3QAPCh. 3 - EFN The most recent financial statements for...Ch. 3 - Prob. 5QAPCh. 3 - Sustainable Growth If the Moran Corp. has an ROE...Ch. 3 - Prob. 7QAPCh. 3 - Prob. 8QAPCh. 3 - Prob. 9QAPCh. 3 - Prob. 10QAPCh. 3 - Prob. 11QAPCh. 3 - Prob. 12QAPCh. 3 - External Funds Needed The Optical Scam Company has...Ch. 3 - Days' Sales in Receivables A company has net...Ch. 3 - Prob. 15QAPCh. 3 - Prob. 16QAPCh. 3 - Prob. 17QAPCh. 3 - Prob. 19QAPCh. 3 - Prob. 20QAPCh. 3 - Calculating EFN The most recent financial...Ch. 3 - Prob. 22QAPCh. 3 - Prob. 23QAPCh. 3 - Prob. 26QAPCh. 3 - Prob. 27QAPCh. 3 - Prob. 28QAPCh. 3 - Prob. 29QAPCh. 3 - Prob. 30QAPCh. 3 - Calculate all of the ratios listed in the industry...Ch. 3 - Prob. 2MCCh. 3 - Prob. 3MCCh. 3 - Prob. 4MCCh. 3 - Prob. 5MC
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