tax rate is 21 percent, and your cost of capital is 14 percent, what is the opportunity cost associated with using the unused capacity for the new product? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.) Opportunity cost
Q: Professor Wendy Smith has been offered the following opportunity: A law firm would like to retain…
A: IRR is the rate at which the present value of cash inflows is equal to the present value of cash…
Q: The expected return of the risky-asset portfolio with minimum variance is 1) the market rate of…
A: In this question, we are required to determine the expected return of the risky-asset portfolio with…
Q: You need to estimate the value of Laputa Aviation. You have the following forecasts (in millions of…
A: The company's total worth today is equivalent to the total of the cash flows along with the terminal…
Q: You just bought a new piece of farm machinery for $100,000 You expect the machinery to have a…
A: Depreciation refers to the reduction in the value of the asset over its useful life. It is used to…
Q: Find the price of a call option on the stock that has a strike price of $13
A: An option is an agreement between two parties granting one the opportunity to buy or sell a security…
Q: Consider the two (excess return) index-model regression results for stocks A and B. The risk-free…
A: Here,Stock AStock BIndex model regression estimates1% + 1.2(rM – rf)2% + .8(rM –…
Q: (Discounted payback period) Gio's Restaurants is considering a project with the following expected…
A: For calculate the discounted payback period, you'll need to accumulate the discounted cash flows…
Q: Explain why there is a difference between the present value of the Strayer lottery jackpot and the…
A: The difference between the present value of the Strayer lottery jackpot and the future value of the…
Q: What is the Macaulay duration of a bond with a coupon of 5.4 percent, nine years to maturity, and a…
A: Coupon rate5.40%Par value$1,000.00Number of years to maturity9Current price$1,055.40
Q: ed machine earns the company revenue at a continuous rate of 60,000t+45,000 dollars per year during…
A: Present value is the value of all future cash flows being discounted at an interest rate for a…
Q: You own a stock portfolio invested 20 percent in Stock Q, 20 percent in Stock R, 10 percent in Stock…
A: Portfolio beta will be reflective of the systematic risk of the portfolio and it cannot be…
Q: A company is going to undertake an issue of $100 million of high yield bonds, with a maturity of 5…
A: Solution:-Effective yield on bonds means the cost of bond from the view point of issuing firm.Bond…
Q: You need to estimate the value of Laputa Aviation. You have the following forecasts (in millions of…
A: Year 1Year 2Year 3Year 4EBITDA$73$93$108$113Depreciation$33$43$48$53Pretax profit$40$50$60$60Tax@…
Q: Stockman Corp. purchased five $1,000 6 % bonds of Galvan Corporation when the market rate of…
A: Variables in the question:Par value=$1000Coupon rate=6%Market rate of interest=12% (paid…
Q: a. A stock has an annual return of 10 percent and a standard deviation of 66 percent. What is the…
A: The smallest expected loss or gain depicts that if the probability of unfavorable circumstances is…
Q: Credit Card Statement Transaction Description Previous balance, $2645.38 June 1 Billing date June 6…
A: Here, DateTransactionTransaction Amount1-JunPrevious Balance $ 2,645.386-JunPayment…
Q: You bought a stock one year ago for $48.47 per share and sold it today for $57.18 per share. It paid…
A: Realized return or Yield of the Stock refers to the actual return that an investor receives during a…
Q: Which of the following statements is most correct? The first payment under a 3-year, annual payment,…
A: The time value of money is the concept that a sum of money is worth more right now than it will be…
Q: Which of the following is NOT a bank liability? savings deposits checkable deposits reserves…
A: Banks are important in the growth of the economy and banks provide loans and accept deposits and…
Q: Dutch auction for $80 billion of US Treasury bills. Noncompetitive Bids total $20 billion, and…
A: Treasury bills are financial instruments of a short-term nature and these instruments are traded…
Q: Desert Trading Company has issued $100 million worth of long-term bonds at a fixed rate of 10%. The…
A: Effective Interest Rate is the rate of interest on the financial instrument that is actually paid or…
Q: ast year you purchased a machine for $1M. You want to sell it today for $0.8M and replace it with a…
A: When the old machines become outdated then these are to be replaced by new machine to increase cash…
Q: What is the bond's price? Multiple Choice $907.89 $1.198.24 $1.050.72 $1.101.45 $1.083.09
A: A bond's price is determined by the bond's future cash flows, which include periodic interest…
Q: Payton wants $5,000 saved in 2 years to make a down payment on a house. How much money should she…
A: Here,Required Amount (FV) is $5,000Time Period in years (n) is 2 yearsInterest Rate (r) is…
Q: When Marilyn Monroe died, ex-husband Joe DiMaggio vowed to place fresh flowers on er grave every…
A: Initial price (P) = $4Interest rate = 10.4% per annum Growth rate = 3.2% per annumBoth these rates…
Q: ai lnc's stock has an expected return of 16.25%, a beta of 1.39, and is in equilibrium. If the…
A: Market risk premium is to be calculated by subtracting the risk-free rate from the market return…
Q: 5) Bond A is a 10-year, 8 percent annual coupon bond with a $1,000 par value. Bond B is a 10-year, 6…
A: Bond ABond BPar value$1,000.00$1,000.00Coupon rate8%6%Coupon payment$80.00$60.00Years to…
Q: Weismann Company issued 6-year bonds a year ago at a coupon rate of 7 percent. The bonds make…
A: Current price of bond is the price which can be paid for purchase of the bond. It is also called…
Q: You can save a significant amount of mortgage interest paid if you make one additional principal and…
A: The prinicipal is $155,000.The annual rate of interest is 5%.The period is 19 years.
Q: The American Pharmaceutical Company (APC) has a policy that all capital investments must have a…
A: Discounted Payback Period is used by investor to determine how long it will take to receive the…
Q: A $61,000 machine with a 5-year class life was purchased 2 years ago. The machine will now be sold…
A: In straight line depreciation there is uniform annual depreciation during the life of equipment and…
Q: Sikes Corporation, whose annual accounting period ends on December 31, issued the following bonds:…
A: Bonds are debt instruments issued by organizations to raise funds to meet various requirements. The…
Q: Barb Muller wins the lottery. She wins $20,000 per year to be paid for 10 years. The state offers…
A: Solution:When an equal amount is paid each period at end of period, it is known as ordinary…
Q: Bond valuation An investor has two bonds in her portfolio, Bond C and Bond Z. Each bond matures…
A: Evaluating a bond's worthiness based on the future income's present value is known as bond…
Q: An investor put 60% of his money into a risky asset offering a 10% return with a standard deviation…
A: The expected return refers to the weighted average profit that the investment provides and is used…
Q: A company borrows $171,000 from a bank. The interest rate on the loan is 6 percent compounded…
A: Loan amount = $171,000Interest =6%Number of years = 5 years
Q: Hollywood Tabloid needs a new state-of-the-art camera to produce its monthly magazine. The company…
A: Present value:The present value is a financial concept that represents the current worth of a…
Q: The Foundational 15 (Algo) [LC LO12-5, [The following information applies to the questions displayed…
A: Payback period is the time which is used to determine that a project or an investment has produced…
Q: 8. On January 1, 2020, TCU Utilities issued $1,000,000 in bonds that mature in five years. The bonds…
A: A bond is a fixed-income security that pays the holder a defined set of regular fixed payments…
Q: Suppose that you borrow $10,000 for four years at 7% toward the purchase of a car. Use PMT= find the…
A: Here,Borrowed Amount (P) is $10,000Time Period (t) is 4 yearsInterest Rate (r) is 7%Compounding…
Q: Find the present value of the following ordinary simple annuity. Payment Interval 3 months Periodic…
A: The PV of an investment refers to the combined value of the cash flows of the investment assuming…
Q: A corporate bond with a 7.600 percent coupon has 15 years left to maturity. It has had a credit…
A: The price of a bond is the sum of the present value of the coupon payments and the face value of the…
Q: Matty deposits $1,300.00 into a Savings Account at their bank. The annual compound interest rate 2%.…
A: Future value can be calculated usingFV = PV* (1 + r / n)ntWhere,PV = Present valueFV = Future valuer…
Q: An ARM for $100,100 is made at a time when the expected start rate is 5 percent. The loan will be…
A: PMT function in excel is used to calculate monthly payments, where PV is the loan balance on start…
Q: If a new full-time employee is paid $44,000 a year, and taxes and insurance add 24% of wages to the…
A: Total cost of employee to the company= Wages + Taxes and Insurance costs
Q: A bond has a face value of $1,000, has 5 years until maturity, and an annual coupon rate of 7%? It…
A: Bond price refers to the price at which the bonds are being traded in the market by the investor for…
Q: onsider a project with free cash flows in one year of $106,89 or $112,37, with each outcome being…
A: Cash inflow in year 1= 10689*50% + 11237*50%= 10963
Q: Even though most corporate bonds in the United States make coupon payments semiannually, bonds…
A: Price of bond is present value of coupon payment in addition to the present value of face value of…
Q: Jose is reviewing a project with a required discount rate of 15.2 percent and an initial cost of…
A: Discounted payback period refers to the time taken to recover the amount invested initially after…
Q: Creative Analysis, Inc. is currently operating at maximum capacity. Assume that all costs and net…
A: In this question, we are required to determine the Needed External Financing.
Manshukh
Step by step
Solved in 3 steps with 2 images
- You are considering adding a new software title to those published by your highly successful software company. If you add the new product, it will use capacity on your disk duplicating machines that you had planned on using for your flagship product, “Battlin’ Bobby.” You had planned on using the unused capacity to start selling “BB” on the west coast in two years. You would eventually have had to purchase additional duplicating machines 10 years from today, but using the capacity for your new product will require moving this purchase up to two years from today. If the new machines will cost $101,000 and can be expensed under section 179, your marginal tax rate is 21 percent, and your cost of capital is 10 percent, what is the opportunity cost associated with using the unused capacity for the new product?You are considering adding a new software title to those published by your highly successful software company. If you add the new product, it will use capacity on your disk duplicating machines that you had planned on using for your flagship product, “Battlin’ Bobby.” You had planned on using the unused capacity to start selling “BB” on the West coast in two years. You would eventually have had to purchase additional duplicating machines 10 years from today, but using the capacity for your new product will require moving this purchase up to 2 years from today. If the new machines will cost $113,000 and can be expensed under Section 179, your marginal tax rate is 21 percent, and your cost of capital is 14 percent, what is the opportunity cost associated with using the unused capacity for the new product? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.)Your highly successful software company is considering adding a new software title to your list. If you add the new product, it will use the full capacity of your disk duplicating machines that you had planned on using for your flagship product, “Battlin’ Bobby.” You had previously planned on using the unused capacity to start selling “BB” on the West Coast in two years. Eventually, you would have had to purchase additional duplicating machines 10 years from today, but since your new product will use up the extra capacity, this will require moving this purchase up to 2 years from today. If the new machines will cost $100,000 and can be expensed under Section 179, your marginal tax rate is 21 percent, and your cost of capital is 12 percent, what is the opportunity cost associated with using the unused capacity for the new product? Note: Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.
- our highly successful software company is considering adding a new software title to your list. If you add the new product, it will use the full capacity of your disk duplicating machines that you had planned on using for your flagship product, “Battlin’ Bobby.” You had previously planned on using the unused capacity to start selling “BB” on the West Coast in two years. Eventually, you would have had to purchase additional duplicating machines 10 years from today, but since your new product will use up the extra capacity, this will require moving this purchase up to 2 years from today. If the new machines will cost $101,000 and can be expensed under Section 179, your marginal tax rate is 21 percent, and your cost of capital is 10 percent, what is the opportunity cost associated with using the unused capacity for the new product? Do not round intermediate calculations. Round your answer to 2 decimal placesYou are in the mail-order business, selling computer peripherals, including high-speed Internet cables, various storage devices such as memory sticks, and wireless networking devices. You are considering upgrading your mail ordering system to make your operations more efficient and to increase sales. The computerized ordering system will cost $250,000 to install and $50,000 to operate each year. The system is expected to last eight years with no salvage value at the end of the service period. The new order system will save $120,000 in operating costs (mainly, reduction in inventory carrying cost) each year and bring in additional sales revenue in the amount of $40,000 per year for the next eight years. If your interest rate is 12%,justify your investment using the NPW method.I know this is a lot of information but this is what I would need to solve the problem. Any help would be appreciated! Your company, VR Co., has been approached to bid on a contract to sell 20,000 voice recognition (VR) computer keyboards a year for four years. Due to technological improvements, beyond that time they will be outdated and no sales will be possible. The equipment necessary for the production will cost $4 million and will be depreciated on a straight-line basis to a zero salvage value. Production will require an investment in net working capital of $80,000 initially and to be returned at the end of the project, and the equipment can be sold for $200,000 at the end of production. Fixed costs are $700,000 per year, and variable costs are $48 per unit. In addition to the contract, you feel your company can sell 4,000, 12,000, 14,000, and 7,000 additional units to companies in other countries over the next four years, respectively, at a price of $145. This price is fixed.…
- 2. As information becomes increasingly available additional storage is needed for the handling of client's insurance capacities. Short Stop is looking to modernise the hardware in which they store the data. Under the proposed idea, Short Stop would purchase dedicated virtual servers and cloud storage which costs $50,000 per year, indefinitely, from the end of year 2 onward (as it takes a year to implement this change). If implemented this would result in an immediate cost saving of $500,000. Short Stop has estimated that it could invest this money elsewhere, as an alternative, at 8% p.a. From a business perspective describe the concept of time value of money in such a way that your description sheds light on how businesses come to financial investment decisions or how investments today can be valued in the future. In the discussion your manager wants a clear description on the benefits of this concept for the business (or any business).A New App Development Team from the Global MBA Program at Universidad Rey Juan Carlos of Spain is working on an apparel shopping tool that can scan your body using your cell phone and find the best fitting clothes for you, which are then modeled by your own dynamic image right there on the screen. Being high-tech, the term is limited to one year, as innovations will be necessary to keep it from being copied or rendered obsolete. EBITDA for the end of year one is expected to be $50,000,000, while developing costs and investments amount to $ 10,000,000. The IRR applicable to IT projects is 57%, as indicated by S&P's sector ROI today. Which of the following is the correct NPV of their project if conceived for one year only? Limit to 2 decimals O $31,847,133.75 O None of the above is correct O $10,284,798.57 O $21,847,133.75If can't do all with explanation please skip iwill definitely like if you follow this or skip pls You are considering purchasing a new database system for your company. The system will cost $80,000, and it will cost another $15,000 for equipment and training. The system is expected to be sold after three years, when you plan to outsource database activities. You hope that you can sell your system to a competitor for $12,000. You expect to save $22,000 per year in operating costs. Your corporate cost of capital is 10%. What is the project’s net investment outlay at Year 0? What are the projects’ operating cash flows in Years 1, 2, and 3? What is the terminal cash flow at the end of Year 3? If the project has average risk, is it expected to be profitable? On what basis did you draw this conclusion? .
- Shonda & Shonda is a company that does land surveys and engineering consulting. They have an opportunity to purchase new computer equipment that will allow them to render their drawings and surveys much more quickly. The new equipment will cost them an additional $1.200 per month, but they will be able to increase their sales by 10% per year. Their current annual cost and break-even figures are as follows: A. What will be the impact on the break-even point if Shonda & Shonda purchases the new computer? B. What will be the impact on net operating income if Shonda & Shonda purchases the new computer? C. What would be your recommendation to Shonda & Shonda regarding this purchase?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).The high-tech home of today features computer apps that control air conditioning, heating, and large and small appliances from your smartphone or tablet. For a typical 2,000-square-foot home, the estimated benefits of a certain high-tech home is $2,000 per year. a. If a payback period of five years (or better) is desirable, how much can be justified for the installation of these apps? b. When N = 5 years, what is the internal rate of return?