In considering an investment, the cost of new equipment is $2 million each and installation is $1.3 million each. The company is considering purchasing 5 units. This purchase will allow service to 300 more customers, but the additional services are only needed 40 days a year. The cost to run extra equipment will be $500 per day
1. You have the following data for the Fosberg Winery. What is Fosberg's return on assets (ROA) ? Return on equity = 15%; Earnings before taxes = $30,000; Total asset turnover = 0.80; Profit margin = 4.5%; Tax rate = 35%. A) 3.6% B) 3.9% C) 5.7% D) 6.4% E) 9.3% 2. Given the following information, what is the v
Project evaluation: The following table presents sales forecasts for Golden Gelt Giftware. The unit price is $40.00. The unit cost of the giftware is $25.00. Year Unit Sales 1 $22,000.00 2 $30,000.00 3 $14,000.00 4 $5,000.00 th
Senior management is considering two proposals to expand the product line. Expansion of the product line requires a new facility and production team. Senior management hired a consulting firm to research the potential product lines. Lava Rocks would like to make this product line for at least 5 years (so the evaluation is for 5
Draw ALL timelines and label them clearly ALL problems should be done by hand. If you wish to type them out, all formulas, calculations and equations must be shown Question # 1 Filkins Fabric Company (FFC) needs to provide 8,300 shirts each year to a local organization in Toronto for summer events for the next eight years
Problems (also attached): 1. The Saltinero Company is considering two investments (data attached). The firm's cost of capital Is 12% and the risk-free rate is 7%. A. Compute the NPV of the 2 investments using the firm's cost of capital. Identify the preferred investment. B. Compute the NPV of the 2 investments using the
Your supervisor, Vic Gonzales, has asked you to prepare a capital budgeting report indicating whether ISGC should replace the existing machine or not.
The Innovative Sporting Goods Company (JSGC) was founded in 1975 in Cambridge, MA. Its founder, Andy Pratt, a mechanical engineer, had developed a sound technique of making baseball bats. Under his leadership, the company had gained national reputation. Recently, however, a new machine had been developed in the industry, which w
Operations Management: Control Charts, p chart, X bar chart, R chart, c chart, Demand, Present Value, EMV, expected value under certainty, expected value of perfect information, Linear Programming,
1. A state department of tourism and recreation collects data on the number of cars with out-of-state license plates in a state park. (The group's position is that more out-of-state plates means the state's advertising programs are working.) The sample size is fixed at n=100 each day. Data from the previous 20 days indicate the
8-16. NPV and IRR. Cuchia Company is presented with the following two mutually exclusive projects. The required return for both projects is 15 percent. Year Project M Project N 0 -$35,000 -$420,000 1 10,000 180,000 2 21,000 200,000 3 15,000 170,000 4 14,000 110,000
Please help with the following problem. WACC and NPV. Sallinger, Inc., is considering a project that will result in initial aftertax cash savings of $6 million at the end of the first year, and these savings will grow at a rate of 4 percent per year indefinitely. The firm has a target debt-equity ratio of .7, a cost of equit
1. Find the Net Investment for both options. Which option is more attractive based solely on this evaluation? 2. Calculate the Net Cash Flows for both options. Which option is more attractive based solely on this evaluation? 3. Briefly explain the reasons for any difference in your answer in question 1 and question 2 or why bo
Use the following to answer questions 1-2: Paige, Inc. is considering the purchase of a new machine costing $480,000. The machine's useful life is expected to be 8 years with no salvage value. The straight-line depreciation method will be used. The net increase in annual after tax cash flow is expected to be $110,000. Paige est
I'm taking courses online and I am having trouble with some of the questions. We have these exams each week and the instructor gives us sample questions to complete, then hands out the exam at the end of the week and we have a time frame that we neeed to complete it. I was hoping you could answer the practice questions and show
Use the net-present-value method (total-cost approach) and a 12% hurdle rate to determine whether Mitchell should make or buy.
Acme Industries is currently purchasing part no. 76 from an outside supplier for $80 per unit. Because of supplier reliability problems, the company is considering producing the part internally in a currently idle manufacturing plant. Annual volume over the next six years is expected to total 300,000 units at variable manufact
Given the following information, calculate the NPV of a proposed project: Cost = $4,000; estimated life = 3 years; initial decrease in accounts receivable = $1,000, which must be restored at the end of the project's life; estimated salvage value = $1,000; earnings before taxes and depreciation = $2,000 per year; method of deprec
Which of the following statements is incorrect? a. Assuming a project has normal cash flows, the NPV will be positive if the IRR is less than the cost of capital. b. If the multiple IRR problem does not exist, any independent project acceptable by the NPV method will also be acceptable by the IRR method. c. If IRR = k
If a company uses the same discount rate for evaluating all projects, which of the following results is likely? a. Accepting poor, high risk projects. b. Rejecting good, low risk projects c. Accepting only good, low risk projects. d. Accepting no projects e. Statements a and b are correct.
Background: CFL Bulbs - manufactured by Global Illuminating (GI) Global Illumination North America (GINA) (See attachment for full background) 1) What is the net annual advantage to the Copley of the CFL bulbs? 2) What is the maximum price GINA should charge BES for the CFL bulbs for the Copley Grand Hotel job?
Company XYZ is planning a new product. In order to produce the new product fixed assets costing$700,000 will be needed with $500,000 payable at once and the balance payable after one year. An initial investment of $330,000 in working capital would also be needed. XYZ expects that after 4 years, the new product will be obsolet
Solitaire Company is planning to purchase a computer server for $400,000 to handle purchase orders from the Internet. Installation for this computer server costs $8,500. It's initial cost, operating costs, income, and salvage value are represented in the following cash flow diagram: (see attachment for diagram) This compute
A toy company currently uses an injection-moulding machine that was purchased two years ago. This machine is being depreciated on a straight-line basis toward a $500 salvage value, and it has 6 years of remaining life. Its current book value is $2,600 and it can be sold for $3,000 at this time. The firm is offered a
NPV/IRR. Growth Enterprises believes its latest project, which will cost $80,000 to install, will generate a perpetual growing stream of cash ﬂows. Cash ﬂow at the end of this year will be $5,000, and cash ﬂows in future years are expected to grow indeﬁnitely at an annual rate of 5 percent. a. If the
Better Mousetraps has developed a new trap. It can go into production for an initial investment in equipment of $6 million. The equipment will be depreciated straightline over 5 years to a value of zero, but in fact it can be sold after 5 years for $500,000. The ﬁrm believes that working capital at each date must be maint
Year zero, Check your net cash flow. You have a tax loss. That has an impact on cash flow (CF) and needs to be taken into account either in year zero or in subsequent years, with the correct method to account for it in the spreadsheet in year 0. Year 0, then list year 1 to year 8 but don't create a cumulative column so you can
ABC Manufacturing is thinking of launching a new product. The company expects to sell $900,000 of the new product in the first year and $1,500,000 each year thereafter. Direct costs including labor and materials will be 55% of sales. Indirect incremental costs are estimated at $80,000 a year. The project will r
When evaluating potential projects, which of the following factors should be incorporated as part of a project's estimated cash flow? A) Any sunk costs that were incurred in the past prior to considering the proposed project. B) Any opportunity costs that are incurred if the project is undertaken. C) Any externalities (both
12. The Nagud Company had the following financial information in the annual audited financial statements. Balance Sheet Current Assets Current Liabilities Cash $ 2,500 Accounts Payable $5,000
Please see attached. An investment of I = $2, 000 dollars now results in the cash flow Fn = $50, n = 0, 1, . . . ....∞ Assume that the inflation-free interest rate is currently i = 2.5%. The inflation-free interest rate will change at the end of the first year. There is a 0.5 probability that it will increase to 3%, and
1. An investment requires an initial outlay of $1,500,000 and generates cash flows of $200,000 at the end of each year for ten years. The required return is 10%. Find the net present value, profitability index and the payback period. Is the investment desirable? 2. 40% tax bracket. Compute the after-tax cash flows for th
A. Prepare a table determining the after-tax net cash flows for this project for years 0 thru 5. b. Determine the NPV for this project. Show all work. c. Make a recommendation to the CFO about this project. Strongly defend your recommendation.
General Electric is considering the investment in a capital project. The initial cost in year 0 is $100,000 to be depreciated straight line over 5 years to an expected salvage value of $5,000. The firm?s tax rate is 35% and it has an 11% cost of capital. For this project an additional investment in working capital of $8,000 is r