ABC Company is considering a new product. Total assets to support expansion cost is $500,000. It is estimated that ABC Company can generate $1,200,000 for annual sales with a 6% profit margin. What is the net income? a. $30,000 b. $72,000 c. $1,200,000 d. $102,000

Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
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Chapter12: Capital Investment Decisions
Section: Chapter Questions
Problem 49P: Cost of Capital, Net Present Value Leakam Companys product engineering department has developed a...
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1.ABC Company is considering a new product. Total assets to support expansion cost is $500,000. It is estimated that ABC Company can generate $1,200,000 for annual sales with a 6% profit margin. What is the net income?
a. $30,000
b. $72,000
c. $1,200,000
d. $102,000

2.Suppose you inherited $200,000 and invested it at 6% per year. How much could you withdraw at the end of each of the next 15 years?
a. $23,431.83
b. $24,764.40
c. $17,843.15
d. $20,592.55

3.What would the future value of $100 be after 5 years at 10% compound interest?
Select one:
a. $161.05
b. $127.84
c. $134.54
d.$151.29

4. ABC Company will pay a dividend of $3.00 per share in the next 12 months (D1). The required rate of return (ke) is 10% and the constant growth rate is 5%. Compute Price of common stock.
a. $60.00
b. $100.00
c. $42.86
d. $70.00

5. XYZ Company’s preferred stock is selling for $25 a share. If the required return is 12%, determine the dividend value be two years from now.
a. $3.76
b. $2.39
c. $2.50
d. $3.00

 
 
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