COnsider a project to supply 100 million postage stamps per year to canada post for the next 5 years.  You have an idle parcel of land available that cost $1,000,000 five years ago; if you sold the land today, it would net you $1,500,000 after tax.  If you sold the land five years from now, the land can be sold again for $1,500,000 after tax. You will need to install $3,800,000 in new manufacturing plant and equip to actually produce stamps; this plant and equipment will be depreciated straight-line to zero over the project's five year life.  The equipment can be sold for $680,000 at the end of the project.  You will need $500,000 in initial net working capital for the project and an additional $50,000 every year thereafter.  Your production costs are $0.5 cents per stamp, and you have fixed costs of $900,00 per year.  If he tax rate is 34 percent and your required return on the project is 12 percent, what bid price should you submit on the contract?


AFTER PAYMENT ENTER PASSWORD : "SHIV" TO UNLOCK THE SOLUTION

Comments

Post a Comment

Popular posts from this blog

Part A: Answer each of the following questions. Be sure to show all of your work and calculations.

Part A: Answer each of the following questions. Be sure to show all of your work and calculations. 1. Woody's Cafe's real estate tax of $1,110.85 was due on November 1, 2013. Due to financial problems, Woody was unable to pay his cafe's real estate tax bill until January 15, 2014. The penalty for late payment is 81/ 4% ordinary interest.Answer the following questions: (a) How much is the penalty Woody must pay (b) What did Woody pay on January 15? Round all answers to the nearest cent. 2. Jane's April 1 inventory had a cost of $48,000 and a retail value of $70,000. During April, net purchases cost $210,000 with a retail value of $390,000. Net sales at retail for Jane for April were $280,000. Calculate the cost of ending inventory using the retail inventory method. (Round to the nearest hundredth percent.) 3. Use the below information to calculate the (a) net sales, (b) gross profit, (c) total operating expenses, and (d) net income.Sales returns $700 Rent expense $1,...
Read more

You are given a choice of taking the simple interest on 100,000 invested for 2 years

You are given a choice of taking the simple interest on  100,000 invested for 2 years at a rate of 3% Or the interest on 100,000 invested for 2 years at an interest rate of 3% compounded quarterly.Which investment earns the greater amount ofinterest? Give the difference between the amounts of interest earned by the two investments.The investment with -----------interest earns $________more interest ((Round to the nearest Cent as needed) Karen Gaines invested $10,000 in a money market account with an interest rate of 1.75% compounded semiannually. Six yearslater, Karen withdrew the full amount to put toward the down payment on a new house. How much did Karen withdraw from the account? Karen withdrew $ . (Round to the nearest cent as needed.) Click here to download the Solution
Read more

Foundations of Finance (7th Edition) (Keown,Martin,Petty) Mini Case p 45

Mini Case On the first day of your summer internship, you’ve been assigned to work with the Chief Financial Officer (CFO) of SanBlas Jewels Inc. Not knowing how well trained you are, the CFO has decided to test your understanding of interest rates. Specifically, she asked you to provide a reasonable estimate of the nominal interest rate for a new issue of Aaa-rated bonds to be offered by SanBlas Jewels Inc. The final format that the chief financial officer of SanBlas Jewels has requested is that of equation (2-1) in the text. Your assignment also requires that you consult the data in Table 2-2.Some agreed-upon procedures related to generating estimates for key variables in equation (2-1)follow.a. The current 3-month Treasury bill rate is 2.96 percent, the 30-year Treasury bond rate is 5.43 percent, the 30-year Aaa-rated corporate bond rate is 6.71 percent, and the inflation rate is 2.33 percent.b. The real risk-free rate of interest is the difference between the calculated average y...
Read more