MGM CO. has been approached to bid on a contract to sell 500 voice recognition(VR) computer keyboards per 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 Due to technological improvements, beyond that time they will be outdated, and no sales will be possible.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 $3 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 $395,000 to be returned at the end of the project, and the equipment can be sold for $305,000 at the end of production. Fixed costs are $570,000 at the end of the production. Fixed costs are 570,000 per year, and variable cost are $75 per unit. In addition to the contract, you feel your company can sell 11,400, 13500, 17900, and 10400 additional units to companies in other countries over the next four years, respectively, at the price of $180. This price is fixed. The tax rate is 21 percent, and the required return is 12 percent. Additionally, the president of the company will undertake the project only

if it has an NPV of $ 120,000. What bid price should you set for the contract?

Solve with Pro Forma Income Statement

MGM Co. has been approached to bid on a contract to sell 5,000 voice recognition (VR) computer keyboards per 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 Due to technological improvements, beyond that time they will be outdated and no sales will be possible.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 $3 million and will be depreciated on a straight-line basis to a zero salvage value. Production will require an investment in a net working capital of $395,000 to be returned at the end of the project, and the equipment can be sold for $305,000 at the end of production. Fixed costs are $570,000 per year, and variable costs are $75 per unit. In addition to the contract, you feel your company can sell 11,400, 13,500 17,900, and 10,400 additional units to companies in other countries over the next four years, respectively, at a price of $180. This price is fixed. The tax rate is 21 percent, and the required return is 12 percent. Additionally, the president of the company will undertake the project only if it has an NPV of $120,000. What bid price should you set for the contract? (Can NOT use Excel)

A firm has an outstanding debt with a coupon rate of 55​%, seven years​ maturity, and a price of​ $1000 per​ $1000 face value. What is the​ after-tax cost of debt if the marginal tax rate of the firm is 30%?

Describe three sources of finance and outline their advantages and disadvantages (150 to 180 words).

Describe the advantages and disadvantages of using a regulated lender such as a bank or credit union.

Explain the return and risk relationship concept in finance.

Describe a situation whereby a department’s attitude is: Risk neutral, risk-averse or risk-seeking.

Explain and critically analyse the distinction between decision tree, expected value and maximax, maximin and regret criterion can be used for decision-making under conditions of risk and uncertainty. The managing director of Bounce Ltd has asked you to explain how each method of the above can be applied in decision-making and comment on the strengths and limitations of each method.

Problem 11-06
New-Project Analysis

The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $980,000, and it would cost another $22,000 to install it. The machine falls into the MACRS 3-year class (the applicable MACRS depreciation rates are 33.33%, 44.45%, 14.81%, and 7.41%), and it would be sold after 3 years for $626,000. The machine would require an increase in net working capital (inventory) of $9,500. The sprayer would not change revenues, but it is expected to save the firm $397,000 per year in before-tax operating costs, mainly labor. Campbell's marginal tax rate is 30%.

1. What is the Year 0 net cash flow?
   $
2. 
   
3. 
   
4. 
   
5. What are the net operating cash flows in Years 1, 2, and 3? Do not round intermediate calculations. Round your answers to the nearest dollar.

   Year 1	$
   Year 2	$
   Year 3	$

6. 
   
7. What is the additional Year 3 cash flow (i.e, the after-tax salvage and the return of working capital)? Do not round intermediate calculations. Round your answer to the nearest dollar.
   $
8. 
   
9. 
   
10. 
    
11. If the project's cost of capital is 14 %, what is the NPV of the project? Do not round intermediate calculations. Round your answer to the nearest dollar.
    $
    
    Should the machine be purchased?
    -Select-YesNoItem 7

Gringotts is currently one of the few Australian listed companies that have not published an annual corporate sustainability report. Since the sustainability report is voluntary and no executive team member is keen on bureaucracy, it is difficult for them to believe that Gringotts should report its sustainability initiatives. But you think there are good reasons to do this, and you want to convince them to look at it the way you do.

Please describe a ethical issue recently reported on the financial media. And write a normative approach to ethical decision-making by helping managers understand and correct ethical violations in their own departments.

Based on the data below, what is the AFN for Pear Computer at the end of next year?

What project or set of projects would be in your capital budget if SS and LL were independent?

I do not understand what PVIFA stands for in this problem and how you are getting the S5(Yen/$) figure (INternational Financial Management Eun & Resnick Chapter 12 Problem 3)

. A five-year, 4 percent Euroyen bond sells at par. A comparable risk five-year, 5.5 percent yen/dollar dual-currency bond pays $833.44 at maturity. It sells for ¥110,000. What is the implied ¥/$ exchange rate at maturity? Hint: The par value of the bond is not necessarily equivalent to ¥100,000

Attached is a spreadsheet showing the most recent financial statements for Wall Enterprises. Please do your calculations on the spreadsheet. Using the percent of sales method forecast the financial statements for the next three years. Sales are anticipated to grow by 10%, 8%, and 5% thereafter. The WACC is 9%. Balance the balance sheets by using the Line of Credit or adding a Marketable Securities line if needed. The interest rate on all debt is 8% and is based on the debt outstanding at the end of the prior year. Dividends are forecast to grow by 10% each year. No additional long-term debt or commons stock will be sold. Make a note of anything you assumed in your forecast. Calculate the FCF and the terminal value to determine the value of the company. Given the 10 million shares outstanding what is the implied stock price? If an investor is willing to pay $250 million for 25% of the company, assuming a terminal value of 8X EBIT in 2019, (ignore the DCF calculations you just did) what return on investment does that provide? Is that likely to be an acceptable investment to the investor?