Louie’s Leisure Products is considering a project which will require the purchase of $1.5 million of new equipment. Shipping and installation will be an additional $300,000. For tax purposes, the equipment will be depreciated straight-line to a salvage value of $200,000 over the five-year life of the project. Louie’s expects to sell the equipment at the end of five years for $100,000. Annual sales from this project are estimated at $1.2 million with annual operating costs estimated at $500,000. Net working capital is equal to $100,000, and all of the net working capital will be recouped at the end of the project. The firm desires a minimal 14% rate of return on this project. The tax rate is 34%. What is the NPV of the project?

Talbot Industries is considering launching a new product. The new manufacturing equipment will cost $16 million, and production and sales will require an initial $1 million investment in net operating working capital. The company's tax rate is 35%.

1. What is the initial investment outlay? Write out your answer completely. For example, 2 million should be entered as 2,000,000.
   $
   
2. The company spent and expensed $150,000 on research related to the new project last year. Would this change your answer?
   -Select-YesNoItem 2
   
3. Rather than build a new manufacturing facility, the company plans to install the equipment in a building it owns but is not now using. The building could be sold for $1.5 million after taxes and real estate commissions. How would this affect your answer?
   The project's cost will -Select-increasedecreasenot changeItem 3 .

You are financing a new car with a three-year loan at 10.5% annual nominal interest, compounded monthly. The price of the car is $14,500. Your down payment is $1,500. What are your monthly payments at 10.5%? (Assume your payments start one month after the purchase, or at the end of the first period.)

the difference between the internal rate of return method and the modified internal

After the acquisition, the good doctor was presented by his Finance Manager the following costs in performing a particular procedure using the equipment:

4.1.      Share in the monthly salaries of the Admin staff                   $20,000

4.2.      Share in maintenance Costs                                                   $10,000

4.3.      Share in other monthly overhead costs                                 $130,000

4.4.      Supplies, medication needed in the procedure                     $15,000

Assuming the procedure’s price is pegged at $20,000, determine the needed total number of patients per month to break even. Assume a net income of $150,000 per month is desired, how many procedures must be done to accomplish this? How would the picture look assuming the cost of supplies and medication from the procedure increases to $22,000.

The company  is deciding on which equipment to acquire. Each is worth 20Million. The company thinking if financing the 50% equity, 25 % via 5 year term loan at 7.5 % annual effective interest and the balance via $100/ share callable preferred shares of stock that promises to pay 4% quarterly dividends. The company consistently paid the 5% semi annual dividends on its common shares. Calculate the weighted average cost of capital of the project. Disregard taxes in your computations. Assume full principal payment on year 5.

After receiving proposals from suppliers, the finance manager came up with the following comparative cash flow projection:

                        Equipment A                           Equipment B

Year 1              $2,000,000                              $4,000,000

Year 2              $2,000,000                              $4,000,000

Year 3              $5,000,000                              $4,000,000

Year 4              $5,000,000                              $4,000,000

Year 5              $6,000,000                              $4,000,000

Using the information derived above, and using the Net Present Value (NPV), Discounted Payback Period and Profitability Index, which will you recommend of the two equipment to acquire?

A firm is considering a project that requires an initial investment of $250,000. The life of this project is five years. Cash flows for each year are estimated as follows:

The cost of capital of this project is 8%. Calculate the profitability index and make a decision.

1.) badBanana co. has an average age of inventory equal to 25 days. if its end of year inventory level is $8,500, then what does that imply for the cost of goods sold during the year? (round to the nearest dollar)

a.) $582

b.) $4964

c.) $21,250

d.) $124,100

2.) What Ratio measures the ability of the firm to satisfy its short term obligations as they come due?

a.) TImes Interest and earned ratio

b.) current ratio

c.) Inventory turnover ratio

3.) Which of the following represents an inflow of cash?

a.) A decrease in any liability

b.) repurchase or retirement of stock

c.) A decrease in any asset

Last year Swensen Corp. had sales of $303,225, operating costs of $267,500, and year-end assets of $163,000. The debt-to-total-assets ratio was 27%, the interest rate on the debt was 8.2%, and the firm's tax rate was 37%. The new CFO wants to see how the ROE would have been affected if the firm had used a 45% debt ratio. Assume that sales and total assets would not be affected, and that the interest rate and tax rate would both remain constant. By how much would the ROE change in response to the change in the capital structure? Select the correct answer. a. 3.27% b. 4.47% c. 4.17% d. 3.87% e. 3.57%

What are the causes of poverty and instability in least developed countries?

Precision Tool is trying to decide whether to lease or buy some new equipment for its tool and die operations. The equipment costs $55,000, has a 3-year life and will be worthless after the 3 years. The pre-tax cost of borrowed funds is 6 percent and the tax rate is 33 percent. The equipment can be leased for $17,500 a year. What is the net advantage to leasing?

Suppose that you are a consultant that gives advice to small entrepreneurial firms that want to become corporations. As you know, becoming incorporated and publicly-traded (issuing common stock) involves adopting Articles of Incorporation, which establish the corporation’s Board of Directors structure, the number of authorized and issued shares, voting procedures, etc.

Today, a client walks in your office and explains that she has successfully operated a small restaurant for many years and is ready to expand. Therefore, she wishes to incorporate and raise enough common equity to open new locations all over Texas.

The client, however, is concerned about other firms trying to acquire control of her firm in the future and asks your advice about 1) what voting rules, if put in the articles of incorporation, might discourage a takeover, 2) whether the number of directors and the timing of their re-election is an important consideration, and 3) if there are any other ideas you might have to help her fend off possible take-over attempts. Give her some advice.

If a firm’s ROE is low and management wants to improve it, explain how using more debt might help.

During the last year, Globo-Chem Co. generated $702 million in cash flow from operating activities and had negative cash flow generated from investing activities (-$384 million). At the end of the first year, Globo-Chem Co. had $120 million in cash on its balance sheet, and the firm had $380 million in cash at the end of the second year.

What was the firm’s cash flow (CF) due to financing activities in the second year? -$29.00 million $72.50 million -$58.00 million $43.50 million

A firm just made a $1,000,000.00 sale to a retail chain. The firm will be 50.00% in cash today, and then pay the remainder in 30 days (a receivable for the firm). The firm fills the sale with $400,000.00 in inventory. Consider how an accountant will handle this transaction.

A.) Revenues will be adjusted by ___________________

B.) Accounts receivable will be adjusted by ______________

C.) Cash will be adjusted by ________________

D.) Inventory will be adjusted by _________________

E.) If COGS is 40% of sales, COGS will be adjusted by _________________