A total of 30,000 units were sold last year. The contribution margin per unit was $2 and fixed expenses totaled $20,000 for the year. This year fixed expenses are expected to increase to $26,000, but the contribution margin per unit will remain unchanged at $2. How many units must be sold this year to earn the same profit as earned last year?

A three-year-old machine has a cost of $19,100, an estimated residual value of $2,600, and an estimated useful life of 33,000 machine hours. The company uses units-of-production depreciation and ran the machine 4,400 hours in year 1; 8,050 hours in year 2; and 8,200 hours in year 3. Calculate the net book value at the end of the third year.

Suppose a company has proposed a new 4-year project. The project has an initial outlay of $25,000 and has expected cash flows of $7,000 in year 1, $9,000 in year 2, $12,000 in year 3, and $13,000 in year 4. The required rate of return is 11% for projects at this company. What is the net present value for this project? (Answer to the nearest dollar.)

Use tables and cash flow diagram: The energy costs of a company involved in powder coating of outdoor furniture are expected to increase at a rate of $400 per year. The cost at the end of the next year (year 1) is expected to be $13,000. How many years will it be from now before the equivalent annual cost is $16,000 per year, if interest is 8% per year?  

Lifecycle Motorcycle Company is expected to pay a dividend in year 1 of $2, a dividend in year 2 of $3, and a dividend in year 3 of $4. After year 3, dividends are expected to grow at the rate of 7% per year. An appropriate required return for the stock is 12%. Using the multistage DDM, the stock should be worth __________ today.

$85.60

$65.13

$63.80

$67.95

Suppose MPC is 0.3, use the spending multiplier to fill in the values for an autonomous government spending of $700.

What are some of the problems with the spending multiplier?

(10 Points)

[You must review the literature about the multiplier]

Using the following data:

• Initial Investment = $10,000,000
• Cash Inflow – Year 1 = $3,000,000
• Cash Inflow – Year 2 = $3,500,000
• Cash Inflow – Year 3 = $4,000,000
• Cash Inflow – Year 4 = $4,900,000
• Cash Inflow – Year 5 = $5,000,000

1. Calculate Internal Rate of Return
2. Calculate Net Present Value (assuming a required return of 8%)

What is the difference between discounted present value and net present value?  

What is the NPV of the following cash flows, assuming a 6% discount rate?

Initial investment – year 0: $(1,000,000)

Year 1 cash flows: $100,000

Year 2 cash flows: $100,000
Year 3 cash flows: $100,000

Year 4 -sale: $1,200,000

A company is considering the purchase of a new piece of equipment for $91,600. Predicted annual cash inflows from this investment are $37,000 (year 1), $29,500 (year 2), $18,500 (year 3), $12,500 (year 4) and $7,000 (year 5). The payback period is:

multiple choice:

3.00 years.

• 4.47 years.

• 2.53 years.

• 4.22 years.

• 3.53 years

A Company is planning to undertake a project requiring initial investment of $50 million and is expected to generate $10 million in Year 1, $13 million in Year 2, $16 million in year 3, $19 million in Year 4 and $22 million in Year 5.

1. Calculate the payback value of the project.
2. Calculate the discount payback value of the project (i=12%).