Question:Your company wants to expand and it will cost $100,00.Your current sales are $1 million and your sales growth is12%. If you expect no increase in expenses, can youexpand next year?a) No, your increase in sales will not cover the expense.b) No, your expansion costs will go up.c) Yes, your increase in sales will cover the expense.d) Yes, your expansion costs will go down.

In order for us to know whether or not your company will be able to expand successfully next year,…

Answered: Question: Your company wants to expand…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter17: Dynamic Capital Structures And Corporate Valuation

Section: Chapter Questions

Problem 8P

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Finally, assume that the new product line isexpected to decrease sales of the firm’s otherlines by $50,000 per year. Should this be considered in the analysis? If so, how?
Let's try a more complex Net Present Value (NPV) question. Say, today (Year 0), a small business invests $1,000 to build a small factory. In one year (Year 1), the Cash Flow from this factory is $2,000. Say, the Cash Flow grows 5% (Growth Rate) in the second year (Year 2) to $2,100. The discount rate is 10%. What is the Net Present Value? Group of answer choices $1,735.54 $2,553.72 $3,553.72
5 ) An office building is currently for sale, and you are thinking of purchasing it. From your extensive market research and knowledge, you know the net operating income for this year is $250,000. You expect the net operating income will grow by 5% in the first five years, 3% in the subsequent five years, and 1.5% for every year after. If you are considering a 15- year investment window and desire a 20% rate of return, how much should you pay for the building
You can make an investment that will immediately cost $52,000. If you make the investment, your after-tax operating profit will be $13,000 per year for five years. After the five years, the profit will be zero, and the scrap value also will be zero. You will finance the investment with internally generated funds and receive the profit at the end of each year. The net present value equation for this investment is: NPV=$| (Carefully enter your answer as an algebraic expression, using the proper notation in the proper format. Do not use the letter x to denote the multiplication sign.)
Ignore income taxes in this problem.) Your Company is considering buying a new machine that would generate annual cost savings would of $14,125. The internal rate of return is 12%. The machine has a projected life of 10 years. What is the maximum you should pay for the machine? Round to the nearest dollar.
You are considering an investment manufacturing cocoa powder. This investment needs $185,000 today and expects to repay you $200,000 in a year from now. What is the IRR of this investment opportunity? Given the riskiness of the investment opportunity, your discount rate is 11%. What does the IRR rule say about whether you should invest? a. The IRR is 7.5%. The IRR rule says that you should not invest. b. The IRR is 8.11%. The IRR rule says that you should not invest. c. The IRR is 1.2%. The IRR rule says that you should not invest. d. The IRR is 16.8%. The IRR rule says that you should invest.
(Ignore income taxes in this problem.) Your Company is considering an investment in a project that will have a three-year life. The project will provide a 4% internal rate of return and is expected to have a $40,000 cash inflow the first year and a $0 cash inflow in the second year, and $50,000 cash inflow in the third year. What investment is required in the project?
You purchase a machine. It costs $75,000 and will expand cash flow by $1,000 /month in year 1 growing by 2% per year after that. The system will work for 10 years before you have to replace it. What are the NPV (at a 3.3% discount rate) and IRR? The vendor offers you another machine costing $100,000 and lasting 12 years, with the same cash flow gains and a 3% growth rate. What are the NPV and the IRR for it? Should you get it?
Your business partner has just presented to you a summary of projected costs and annual receipts for a new product line. He asks you to calculate the before-tax IRR & ERR for the investment opportunity. The company’s MARR = 15% quarterly. Is this investment justified?
A company is thinking of investing in one of two potential new products for sale. The projections are as follows: Year Revenue/cost £ (Product A) Revenue/cost £ (Product B)0 (150,000) outlay (150,000) outlay 1 24,000 12,0002 24,000 25,3333 44,000 52,0004 84,000 63,333 Calculate the IRR for Product B only using 3% and 15% to 2 d.p.
K Assume that Ideko's market share will increase by 0.40 percent per year as shown in the table, (e.g., Ideko's market share will be 10.00% in 2006). What production capacity will Ideko require each year for the next five years? When will an expansion become necessary (i.e., when will production volume exceed the current level by 50%)? e. What production capacity will Ideko require each year for the next five years? First compute the projected annual market share. Then, using these projections, calculate the projected annual production volume: (Round the volumes to one decimal place and the percentage of market share to two decimal places.) dd Sales Data Market Size (000 units) Market Share Production Volume (000 units) Data table Growth/Year 2005 4.80% 0.40% % (Click on the following icon in order to copy its contents into a spreadsheet.) - X Ideko Sales Assumptions Sales Data Growth/Year 2005 Market Size (000 units) Market Share 4.80% 10.000 0.40% 9.6% Check answer
6. Your company's marketing department anticipates that in 3 years the sales price for your industrial lathe will be $29,500. Today the sales price is $26,900. Determine the inflation rate associated with this price change. 7. You plan to purchase a house in 8 years, and at that time will pay $150,000. At a real interest rate of 4.50% and inflation rate of 2.60%, what is the present worth of the cost of the house?

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