The owner of a bicycle repair shop forecasts revenues of $168,000 a year. Variable costs will be $52,000, and rental costs for the shop are $32,000 a year. Depreciation on the repair tools will be $12,000. a. Prepare an income statement for the shop based on these estimates. The tax rate is 20%
Q: Which of the following firms is the most leveraged? O Cash coverage ratio 1.64 Cash coverage ratio…
A: Hi There, Thanks for posting the questions. As per our Q&A guidelines, must be answered only one…
Q: Dewey Cheetham & Howe Accounting firm is considering the purchase of a $1,000 New Haven Municipal…
A:
Q: Suppose an annuity will pay $14,000 at the beginning of each year for the next 5 years. How much…
A: Annual payment (P) = $14,000 Interest rate (r) = 6.5% Period (n) = 5 Years
Q: A firm had year end 2004 and 2005 retained earnings balances of $670,000 and $560,000, respectively.…
A: Ending retained earnings = Beginning retained earnings + Net income - Dividends Net income = Ending…
Q: QUESTION 3 You invest $1.000 in a bank term deposit today 0 but are planning md your money ane the…
A: Present Value: The present value is the value of cash flow stream or the fixed lump sum amount at…
Q: A family of four has an income of $15,000 today and will earn $24,000 tomorrow. a. If the family…
A: Income =$15,000 today Income =$24,000 tomorrow. Time = 2 period
Q: Consider a 30-year fixed-rate home loan of $565,500 with an interest rate of 4.25%. What is the…
A: The total amount of interest paid is calculated as the total payment made over the loan tenure less…
Q: how much money
A: The amount borrowed refers to the principal amount which is borrowed from the bank or financial…
Q: 2?The seller has agreed to let the buyer move into the property two days prior to the date of…
A: Homeowners Insurance policy is specific to the current home that is insured. Every detail of the…
Q: Mrs. Nash will contribute $200 to her RRSP at the end of each month for 15 years. How much more…
A: The extra amount that she will have due to increased saving is calculated as difference in amount…
Q: 14. What is the gain or loss on a $15,000 bond sold at 199.5 to yield 11%, compounded semi-annually,…
A: Here,
Q: What is the present value (i.e., price) today of a bond that will pay its owner…
A: Maturity value = $ 1000000 Life of bond = 5 years discount rate = 4% Price of the bond today = ?
Q: You are considering purchasing a bond between settlement periods with a 6% coupon rate and 4…
A: A bond is a type of financial asset in which the issuer owes the holder a debt and is required to…
Q: Charlie wants to withdraw $12,000 each year forever from his account. At an interest rate of 6% per…
A: Perpetuity is the stream of cash flows or payments that are made at equal intervals that do not have…
Q: Common shares are the most important security issued by the companies to raise the funds. Since,…
A: A fractional ownership that begins the maximum entrepreneurial commitment associated with a trading…
Q: What is this firm's WACC?
A: WACC or Weighted average cost of capital is the weighted average cost of different sources of…
Q: Syntech makes digital cameras for drones. Their basic digital camera uses $80 in variable costs and…
A: The operational earnings are the profits that the company earns by subtracting only its operating…
Q: If the value of contractual transactions is affected by exchange rate fluctuations, most likely the…
A: Sometimes the currency exchange rate will fluctuate after a firm has already undertaken a financial…
Q: Classify the financial problem. Assume a 9% interest rate compounded annually. Deposit $200 at the…
A: Solution:- When an equal amount is deposited each year, it is called annuity. The accumulated value…
Q: what are the consequences of bank failures?
A: A bank failure occurs when a bank is unable to meet its obligations to its depositors or other…
Q: 1. Juanita inherits $10,000 and invests it for 30 years at a “net” 9% return. How much money will…
A: Investment (PV) = $10,000 Interest rate (r) = 9% Period (n) = 30 Years
Q: A 5-year project will require an investment of $100 million. This comprises of plant and machinery…
A: Market Price $ 500.00 Dividend in year 1 4 Growth Rate 9% Total number of Shares…
Q: risk pooling premium actuarially fair insurance premium deductible third party payer moral bazard
A: In the world of finance insurance is an important concept. Insurance is used for the purpose of risk…
Q: What is the monthly payment for a home costing $475,000 with a 20% down payment and the balance…
A: Given: Cost of home = $475000 Down payment = 20% Number of years = 30 Number of months "n" = 30*12 =…
Q: May's Dress Shop's inventory at cost on January 1 was $40,500. Its retail value was $60,500. During…
A: Given: Particulars Cost Retail Beginning inventory $40,500 $60,500 Purchases $195,300…
Q: 13. ABC manufacturing wants to purchase a new machine that is expected to save $12,000 in annual…
A: Discounted payback period is the period in which the initial cost of the project is recovered by…
Q: True or False. and briefly explain. a. Under the Capital Asset Pricing Model (CAPM), if a stock has…
A: “Since you have asked multiple questions, we will solve the first question for you. If you want any…
Q: The AUD/$ spot exchange rate is 1.60 and the SF/$ is 1.25. The AUD/SF cross exchange rate is: 0.7813…
A: (Note: We’ll answer the first question since the exact one wasn’t specified. Please submit a new…
Q: 6. Given the following information for Computech, compute the firm's degree of combined leverage…
A: Since: Degree of combined Leverage=Percentage change in EPSPercentage change in sales here…
Q: If the interest rate is zero, the future value interest factor equals?
A: If the interest rate is zero, the future value interest factor =-1.0
Q: Calcion Industries produces two joint products, Y and Z. Prior to the split-off point, the company…
A: Joint cost of production is $29,000 Product Y weighs 20 pounds product Z weighs 80 pounds roduct Y…
Q: You wish to evaluate which of the two equity funds delivered a better risk adjusted return in terms…
A: Sharpe ratios is calculated as excess return over the risk free rate divided by the standard…
Q: Sales forecast based on external data. Nelson Heating and Ventilating Company estimates the coming…
A: As per our guidelines we are supposed to answer only one question (if there are multiple questions…
Q: What is the cash value of an electronic gadget which was bought with a down payment of P20,000 and a…
A: Cash Value: It is the value of a property or equipment and is computed by the sum of the down…
Q: ou have the following information: the current exchange rate is SGD 0.40/ MYR. Meanwhile, the SGD…
A: Arbitrage profit is generated by purchasing and selling a same securities or portfolio at varying…
Q: Consider a 30-year fixed-rate home loan of $410,500 with an interest rate of 3.125%. What is the…
A: The monthly payment can be calculated with the help of present value of annuity function
Q: A couple who wants to purchase a home with a price of $340,000 has $100,000 for a down payment. If…
A: Loan Amount (P)=340000- 100000=$240000 Rate of Interest (r)=6%=0.06 n=25 Years=300
Q: Suppose Avon and Nova stocks have volatilities of 46% and 23%, respectively, and they are…
A: Given: Standard deviation of Avon = 46% Standard deviation of NOVA = 23%
Q: Suppose that the local sales tax rate is 7% and you purchase a car for $14,600. a. How much tax is…
A: Tax: The amount of money that a government makes people pay based on their income, the value of…
Q: What is John’s monthly payment on the loan assuming end-of-month payments?
A: Loan Payment: It is the payment made to the lender by the borrower to amortize the loan. These…
Q: Using the present value tables, which project will Ivanhoe choose? (Round answers to 3 decimal…
A: Profitability Index: The profitability index is a measure of an investment or project's…
Q: a. Pay-back period b. Discounted Pay-back period c. Internal Rate of Return (IRR)
A: Payback period is the period within which the sum invested by the company in a project will be…
Q: Agapito is a speculator who has a futures contract to deliver, on December 31, 1.5 million dollars…
A: Here, Future Contract delivery on 31st December of 1.5 million dollar in exchange of 30 million…
Q: easonal working capital needs are best financed by:
A: Working capital refers to the difference between current assets and current liabilities. Working…
Q: A 5-year project will require an investment of $100 million. This comprises of plant and machinery…
A: Hi There, thanks for posting the question. But as per Q&A guidelines, we must answer the first…
Q: 2) Assume there are two bidders who are competing at a private-value auction, decided by a sealed…
A: The object will be offered to the bidder with the highest valuation at a price equal to their…
Q: Compute the required return for this stock.
A: Required Return: It refers to the minimum return required for investing in a business by the…
Q: A $3600, 6.9% bond with semi-annual coupons redeemable at par in 5 years was purchased at 100.1.…
A: Par value (F) = $3600 Coupon rate = 6.9% Annual coupon amount (C) = 3600*0.069 = $248.40 Years to…
Q: The Hartley Hotel Corporation is planning a major expansion. Hartley is financed 100 percent with…
A: Given: Beta = 1.3 Market return = 14% Risk free rate = 9%
Q: A $660,000 townhome in Richmond Hill was purchased with a down payment of 20% of the amount. A…
A: Given That: Cost of Townhome=$660000 Down payment = 20% Down payment amount = 20% of…
The owner of a bicycle repair shop
a. Prepare an income statement for the shop based on these estimates. The tax rate is 20%.
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 1 images
- A restaurant is considering the purchase of new tables and chairs for their dining room with an initial investment cost of $515,000, and the restaurant expects an annual net cash flow of $103,000 per year. What is the payback period?Caduceus Company is considering the purchase of a new piece of factory equipment that will cost $565,000 and will generate $135,000 per year for 5 years. Calculate the IRR for this piece of equipment. For further instructions on internal rate of return In Excel, see Appendix C.Gardner Denver Company is considering the purchase of a new piece of factory equipment that will cost $420,000 and will generate $95,000 per year for 5 years. Calculate the IRR for this piece of equipment. For further Instructions on internal rate of return in Excel, see Appendix C.
- Talbot Industries is considering launching a new product. The new manufacturing equipment will cost $17 million, and production and sales will require an initial $5 million investment in net operating working capital. The company’s tax rate is 25%. What is the initial investment outlay? The company spent and expensed $150,000 on research related to the new product last year. What is the initial investment outlay? Rather than build a new manufacturing facility, the company plans to install the equipment in a building it owns but is not now using. The building could be sold for $1.5 million after taxes and real estate commissions. What is the initial investment outlay?The Scampini Supplies Company recently purchased a new delivery truck. The new truck cost $22,500, and it is expected to generate net after-tax operating cash flows, including depreciation, of $6,250 per year. The truck has a 5-year expected life. The expected salvage values after tax adjustments for the truck are given here. The company’s cost of capital is 10%. Should the firm operate the truck until the end of its 5-year physical life? If not, then what is its optimal economic life? Would the introduction of salvage values, in addition to operating cash flows, ever reduce the expected NPV and/or IRR of a project?Manzer Enterprises is considering two independent investments: A new automated materials handling system that costs 900,000 and will produce net cash inflows of 300,000 at the end of each year for the next four years. A computer-aided manufacturing system that costs 775,000 and will produce labor savings of 400,000 and 500,000 at the end of the first year and second year, respectively. Manzer has a cost of capital of 8 percent. Required: 1. Calculate the IRR for the first investment and determine if it is acceptable or not. 2. Calculate the IRR of the second investment and comment on its acceptability. Use 12 percent as the first guess. 3. What if the cash flows for the first investment are 250,000 instead of 300,000?
- Your company is planning to purchase a new log splitter for is lawn and garden business. The new splitter has an initial investment of $180,000. It is expected to generate $25,000 of annual cash flows, provide incremental cash revenues of $150,000, and incur incremental cash expenses of $100,000 annually. What is the payback period and accounting rate of return (ARR)?A grocery store is considering the purchase of a new refrigeration unit with an Initial Investment of $412,000, and the store expects a return of $100,000 in year one, $72000 in years two and three, $65,000 in years four and five, and $38,000 in year six and beyond, what is the payback period?Consolidated Aluminum is considering the purchase of a new machine that will cost $308,000 and provide the following cash flows over the next five years: $88,000, 92,000, $91,000, $72,000, and $71,000. Calculate the IRR for this piece of equipment. For further instructions on internal rate of return in Excel, see Appendix C.
- Bouvier Restaurant is considering an investment in a grill that costs $140,000, and will produce annual net cash flows of $21,950 for 8 years. The required rate of return is 6%. Compute the net present value of this investment to determine whether Bouvier should invest in the grill.Now assume that it is several years later. The brothers are concerned about the firm’s current credit terms of net 30, which means that contractors buying building products from the firm are not offered a discount and are supposed to pay the full amount in 30 days. Gross sales are now running $1,000,000 a year, and 80% (by dollar volume) of the firm’s paying customers generally pay the full amount on Day 30; the other 20% pay, on average, on Day 40. Of the firm’s gross sales, 2% ends up as bad-debt losses. The brothers are now considering a change in the firm’s credit policy. The change would entail: (1) changing the credit terms to 2/10, net 20, (2) employing stricter credit standards before granting credit, and (3) enforcing collections with greater vigor than in the past. Thus, cash customers and those paying within 10 days would receive a 2% discount, but all others would have to pay the full amount after only 20 days. The brothers believe the discount would both attract additional customers and encourage some existing customers to purchase more from the firm—after all, the discount amounts to a price reduction. Of course, these customers would take the discount and hence would pay in only 10 days. The net expected result is for sales to increase to $1,100,000; for 60% of the paying customers to take the discount and pay on the 10th day; for 30% to pay the full amount on Day 20; for 10% to pay late on Day 30; and for bad-debt losses to fall from 2% to 1% of gross sales. The firm’s operating cost ratio will remain unchanged at 75%, and its cost of carrying receivables will remain unchanged at 12%. To begin the analysis, describe the four variables that make up a firm’s credit policy and explain how each of them affects sales and collections.Talbot Industries is considering launching a new product. The new manufacturing equipment will cost 17 million, and production and sales will require an initial 5 million investment in net operating working capital. The companys tax rate is 40%. a. What is the initial investment outlay? b. The company spent and expensed 150,000 on research related to the new product last year. Would this change your answer? Explain. c. Rather than build a new manufacturing facility, the company plans to install the equipment in a building it owns but is not now using. The building could be sold for 1.5 million after taxes and real estate commissions. How would this affect your answer?
