Precise Machinery is analyzing a proposed project. The company expects to sell 4,000 units, give or take 5 percent. The expected variable cost per unit is $221.00 and the expected fixed costs are $500,650. Cost estimates are considered accurate within a plus or minus 5 percent range. The depreciation expense is $109,650. The sales price is estimated at $641.75 per unit, give or take 5 percent. The tax rate is 35 percent. The company is conducting a sensitivity analysis on the sales price per unit using a sales price estimate of $652.34. What is the operating cash flow based on this analysis? $735,853 $798,774 $765,756 $834,439 $714,897
Q: how can a lease fee estate have a value that can be transferred to another party?
A: Lease Hold Estate A leasehold estate is a temporary ownership of the right to possess land or other…
Q: You are financial analyst in Cairo Equity, and your boss wants your advice on the potential stock…
A: Inflation rate = 9% Real Interest rate = 2.50% (1 + Nominal Interest…
Q: You are considering the tax consequences of investing $2,000 at the end of each year for 30 years in…
A: For calculation of accumulated value after 30 years , we will use formula of future value of annuity…
Q: If the bonds can be called in five years at a premium of 10.0 percent over par value, what is the…
A: We compute the yield to call. Current price of the Bond = 1133.81…
Q: QUESTION 3 If international capital markets are integrated, a US-based MNE investing in a foreign…
A: Cost of Capital also known as hurdle rate for a project is the minimum rate of return that the…
Q: 24. Assume that your company faces the following investment opportunities: Initial cash outflow PI…
A: The question is related to the Capital Rationing . Capital rationing refers to a situation where a…
Q: FTC Capital recently issued bonds that mature in 15 years. They have a par value of$1,000, and an…
A: Issue price of bonds would be present value of interest annuity & maturity amount at market rate…
Q: Assume that the company is a corporation with shareholders and debtholders. That is, the corporation…
A: Net present value is a capital budgeting method which will help in finding the difference between…
Q: Counterparty credit risk is a function of the probability of default, exposure at default, and loss…
A: The counterparty credit risk refers to the risk that a company faces if the counterparty fails to…
Q: Polycorp Steel Division is considering a proposal to purchase a new machine to produce a new product…
A: The difference between the current value of cash inflows and outflow of cash over a period of time…
Q: A MNE raises capital in two different countries with the following characteristics: $150,000,000 in…
A: The after-tax cost of debt is a tax shield we get on interest paid because the interest payments are…
Q: M4
A: Efficient markets are the markets that reflect the information evenly in the stock prices. Every…
Q: You have the option to open a store today at a cost of 30, which would generate a present value of…
A: Cost 30 Profit 50
Q: Mf4. All of the following are advantages of a stock dividend distribution to shareholders on…
A: When a company issue additional shares to the existing shareholders as dividends instead of cash…
Q: at is the line item that appears on a statement of financial positi- Cost of sales. Dividends paid.…
A: The line item that appears on the statement of financial position is, Option C Current portion…
Q: point) Performance indicators are "quantitative measures" used as benchmarks to compare results with…
A: “Since you have asked multiple questions, we will solve the first question for you. If you want any…
Q: The nominal rate of return is, % earned by an investor in a bond that was purchased for $973, has an…
A: Solution:- Nominal rate of return means the percentage of return earned by investors on the amount…
Q: How foreign currency risk can affect the value of a multinational company?
A: Foreign currency risk is the risk due to change in the value of domestic currency with respect to…
Q: When a dividend has been declared , it becomes a liability of the firm and can not be recinded…
A: Dividend payments are distribution of profits or earnings by a company to its shareholders. The…
Q: FIN Ltd is a manufacturing company based on a tax free Island. They are considering whether to…
A: Net Present Value: NPV is a measure of profitability for a project or an investment expressed in…
Q: You have just retired with savings of $6 million. If you expect to live for 45 years and to earn 9%…
A: Annual amount of spending at the start of each year is calculated using following equation Annual…
Q: Smith Savings is unlevered. The company expects to have Free cash flow of $8 in perpetuity. The…
A: A levered firm is a firm whose operations work both on the shareholder's equity and debt. Debt is…
Q: Given the 2-year LIBOR rate r₂ = 4% and the forward rate f26 = 3%, calculate the spot rate $6. Give…
A: The forward rate is the yield of a future payment plan. It can be calculated from the spot rates of…
Q: What is true regarding subsidized and unsubsidized loans? Both types of loans require students to…
A: Subsidized loans-Such loans are granted based on financial need i.e., must prove financial need.…
Q: What is the discounted payback period for these cash flows
A: The number of years it takes to break even the initial expenditure, by discounting future cash…
Q: F4. You buy a TIPS at issue at par for $1,000. The bond has a 4.94% annual pay coupon. Inflation…
A: Coupon rate A coupon rate is a rate of interest that is received by the bondholder from the date of…
Q: Question 1b/ Give a brief explanation of what CUM DIV and EX DIV represent? Can investment managers…
A: Cum dividend (cum div) and ex dividend (ex div) refer to the status of a security with respect to…
Q: You want to set up a covered call position on 1,000 shares of XYZ stock. Your goal is to collect the…
A: An option contract is an agreement that provides the buyer with the right to acquire or transfer a…
Q: Presented below are data for an electrical repair shop for next year. Time charge Material loading…
A: Profit margin refers to the earnings of a business on a sale. The profit margin is the difference…
Q: The Quick Ratio is often use in conjuction with the current ratio because A It is easier to…
A: In finance we use different financial ratios to determine the financial health and position of a…
Q: aluate the performance of three mutual funds. One fund has a load, the second has a backend load the…
A: a). Calculation of no. of shares purchased today with Rs 1000 Fund A: NAV0 = 12 Front end load = 4%…
Q: 7. Imperial Oil decides to raise $500 million by issuing 7-year semi-annual bonds that pay interest…
A: A bond represents a debt instrument that obliges the issuer to pay regular periodic payments along…
Q: Find the expected return on Red Line Brewery's stock that is trading at $70 per share and is…
A: Expected rate of return on the stock is the minimum return investors would require considering the…
Q: The expected constant-growth rate of dividends is ______% for a stock currently priced at $78, that…
A: In the given case, the current paid dividend or last paid dividend = D0 is given , the required…
Q: Which of the following statements is correct? Check all that apply. Non-systematic risk reflects the…
A: In this question, we will finding correct statement regarding investment portfolio and market…
Q: 14. Pear, Inc. is a manufacturer that is heavily dependent on plastic parts shipped from Malaysia.…
A: Given: Correlation for futures of commodity A is 0.70 Correlation for futures of commodity B is 0.80…
Q: An investment has the potential of eaming you $5000 at a 15 percent probability, $3000 at a 45…
A: Expected value of investment = Summation of potential investment earnings × Probability of each…
Q: ou own a portfolio that has $18,000 invested in Stock A and $17,000 invested in Stock B. The…
A: Total Investments = Stock a + Stock b = 18000 + 17000 = 35000
Q: The semiannual coupon paying, ten-year bonds of Sogang Corporation are selling at par value…
A: Maturity = 10 year Effective annual rate = 4.295% Face value of the bond…
Q: An analyst wants to estimate the ABC's equity value. ABC's current net income is 1.95 million and…
A: An analyst wants to estimate the ABC's equity value. ABC's current net income 1.95 Million and…
Q: SAB Company The SAB Company is considering the purchase of a new machine at a cost of $ 14,000 to…
A: The company may need to decide whether to replace the old machine with a new machine or not. The…
Q: You own a portfolio that is 1 percent invested in Stock W, 23 percent invested in Stock X,22 percent…
A: Expected rate of return of portfolio refers to a term that is being used in order to determine the…
Q: When a currency appreciates it makes domestic businesses competitive with imported goods in their…
A: When a currency of a country appreciates relative to another country, the country’s goods prices…
Q: The expected constant-growth rate of dividends is __96 for a stock currently priced at $66, that…
A: In the given case, the dividend just paid is given . It is taken as current paid dividend or last…
Q: A stock is expected to return 8% in a normal economy, 12% if the economy booms, and lose 6% if the…
A: State Return Probability Normal Economy 8% 56% Boom 12% 24% Recession -6% 20% To Find:…
Q: f a bond's yield to maturity does not change, the return on the bond each year will be equal to the…
A: YTM of the bond is the return per year a bond holder will receive if the bondholder holds the bond…
Q: Proforma balance sheet for the upcoming year is given. The estimated net income is $2,621.60. If the…
A: Proforma balance sheet is an estimation of the company's total asset, liablities and shareholder's…
Q: S 2 A bond has a face value of $1,000, an annual coupon rate of 9 percent, yield to maturity of 10…
A: Bond duration also known as Macaulay duration is the measure that depicts the time required to…
Q: Which of the following statements is TRUE? a. Agency problem involves the enrichment of the firm's…
A: The statement which is true is , Option C A Compensation plan that includes a salary plus stock…
Q: Trades among three members, A, B and C, are settled via multi-lateral netting with a centralized…
A: As the intermediary in a transaction, central counterparty clearing houses (CCPs) provide two main…
15
Step by step
Solved in 2 steps with 2 images
- Banyan Industries has two divisions, a tax rate of 30%, and a minimum rate of return of 20%. Division A has a weighted average cost of Capital of 9.5% and is looking at a new project that will generate a profit of $1,200,000 from a machine that costs $4,000,000. Division B has a weighted average cost of capital of 9.5% and is looking at a new project that will generate a profit of $1,350,000 from a machine that costs $5,000.000. A. Calculate the EVA for each of Banyans divisions. B. Calculate the RI for each of Banyans division. C. If Banyan uses EVA to evaluate the projects, which division has the better project and by how much? D. If Banyan uses RI, which division has the better project and by how much? E. What are some of the reasons for the similarity or difference that you found in the use of EVA versus RI?The Can-Do Co. is analyzing a proposed project. The company expects to sell 12,000 units, give or take 4 percent. The expected variable cost per unit is 7 and the expected fixed cost is 36,000. The fixed and variable cost estimates are considered accurate within a plus or minus 6 percent range. The depreciation expense is 30,000. The tax rate is 34 percent. The sale price is estimated at 14 a unit, give or take 5 percent. What is the contribution margin for a sensitivity analysis using a variable cost per unit of 8?Chesapeake Yachting Gear is analyzing a proposed project. The company expects to sell 6,000 units, plus or minus 3 percent. The expected variable cost per unit is $11 and the expected fixed costs are $158,000. The fixed and variable cost estimates are considered accurate within a plus or minus 4 percent range. The depreciation expense is $68,000. The tax rate is 30 percent. The sales price is estimated at $64 a unit, give or take 2 percent. What is the operating cash flow under the best case scenario? Group of answer choices $86,228 $100,610 $116,440 $137,503 $150,943
- Eton Company is analysing a proposed project. It expects to sell 150 units, give or take 4%. The expected variable cost per unit is $10 and the expected fixed cost is $400. The fixed and variable cost estimates are considered accurate within a plus or minus 5% range. The depreciation expense and interest expense are $300 and $100 respectively. The tax rate is 10%. The sale price is estimated at $20 a unit, give or take 5%. What is the after tax cash flow under the optimistic case scenario? A. $1002.6 B. $1114.0C. $1302.6 D. $1272.6Chadron Motors is reviewing a project with sales of 6,200 units, ±2 percent, at a sales price of $29, ±1 percent, per unit. The expected variable cost per unit is $11, ±3 percent, and the expected fixed costs are $85,578, ±1 percent. The depreciation expense is $68,000 and the tax rate is 21 percent. What is the net income under the worst-case scenario? A. $4,696 B. –$28,704 C. $15,846 D. −$39,713 E. −$38,578The Meldrum Co. is analyzing a proposed project. The company expects to sell 3,000 units, give or take 15%. The expected variable cost per unit is $8 and the expected fixed costs are $12,500. Cost estimates are considered accurate within a plus or minus 5% range. The depreciation expense is $4,000. The sale price is estimated at $18/unit, give or take 2%. The project requires $24,000 of fixed assets which will be worthless when the project ends in six years. Also required is $6,500 of net working capital for the life of the project. The tax rate is 34% and the required rate of return is 12%. What is the net present value of the worst-case scenario?
- Appalachian Crafts is analyzing a project with expected sales of 18,900 units, ±2 percent. The expected variable cost per unit is $23 and the expected fixed costs are $52,000. Cost estimates are considered accurate within a range of ±1 percent. The depreciation expense is $18,400. The sale price is estimated at $54 a unit, ±2 percent. What is the total dollar difference between the revenue using the optimistic sale price versus the expected sale price?LED Energy Savings is analyzing a proposed project. The company expects to sell 8,000 units, plus or minus 2 percent. The expected variable cost per unit is $11 and the expected fixed costs are $287,000. The fixed and variable cost estimates are considered accurate within a plus or minus 5 percent range. The depreciation expense is $68,000. The tax rate is 32 percent. The sales price is estimated at $64 a unit, give or take 3 percent. What is the earning before interest and taxes under the BEST case scenario? A. $58,480 B. $46,920 C. $93,160 D. $69,000 (I know it's not $58,480 so if someone could include the calculation, I would appreciate it!)You are evaluating a product for your company. You estimate the sales price of product to be $240 per unit and sales volume to be 11,400 units in year 1; 26,400 units in year 2; and 6,400 units in year 3. The project has a 3 year life. Variable costs amount to $165 per unit and fixed costs are $214,000 per year. The project requires an initial investment of $366,000 in assets which will be depreciated straight-line to zero over the 3 year project life. The actual market value of these assets at the end of year 3 is expected to be $54,000. NWC requirements at the beginning of each year will be approximately 13% of the projected sales during the coming year. The tax rate is 21% and the required return on the project is 8%. What will the year 2 free cash flow for this project be? Multiple Choice $1,298,760 $1,644,000 $796,760 $1,420,760
- You are evaluating a product for your company. You estimate the sales price of product to be $150 per unit and sales volume to be 10,500 units in year 1; 25,500 units in year 2; and 5,500 units in year 3. The project has a 3 year life. Variable costs amount to $75 per unit and fixed costs are $205,000 per year. The project requires an initial investment of $339,000 in assets which will be depreciated straight-line to zero over the 3 year project life. The actual market value of these assets at the end of year 3 is expected to be $45,000. NWC requirements at the beginning of each year will be approximately 15% of the projected sales during the coming year. The tax rate is 21% and the required return on the project is 12%. What will the year 2 free cash flow for this project be?You are evaluating a product for your company. You estimate the sales price of product to be $150 per unit and sales volume to be 10,500 units in year 1; 25,500 units in year 2; and 5,500 units in year 3. The project has a 3 year life. Variable costs amount to $75 per unit and fixed costs are $205,000 per year. The project requires an initial investment of $339,000 in assets which will be depreciated straight-line to zero over the 3 year project life. The actual market value of these assets at the end of year 3 is expected to be $45,000. NWC requirements at the beginning of each year will be approximately 15% of the projected sales during the coming year. The tax rate is 21% and the required return on the project is 12%. What will the year 2 free cash flow for this project be? Multiple Choice A. $922,655 B. $1,372,655 C. $1,594,500 D. $1,259,655You are evaluating a product for your company. You estimate the sales price of the product to be $200 per unit and sales volume to be 2,000 units in year 1; 5,000 units in year 2; and 1,000 units in year 3. The project has a three-year life. Variable costs amount to $75 per unit and fixed costs are $200,000 per year. The project requires an initial investment of $360,000 in assets that will be depreciated straight-line to zero over the three-year project life. The actual market value of these assets at the end of year 3 is expected to be $40,000. NWC requirements at the beginning of each year will be approximately 20 percent of the projected sales during the coming year. The tax rate is 21 percent and the required return on the project is 13 percent. What will the year 2 free cash flow for this project be? Multiple Choice $170,412 $192,500 $201,300 $520,950