Corporate Finance
12th Edition
ISBN: 9781259918940
Author: Ross, Stephen A.
Publisher: Mcgraw-hill Education,
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Chapter 7, Problem 30QAP
Summary Introduction
To compute: The break-even purchase price.
Introduction: Investors invest in bonds to ensure regular income (interest income) on their investments. Bondholders are the investors who are risk averse.
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Students have asked these similar questions
The management of Penfold Corporation is considering the purchase of a machine that would cost $390,000, would last for 7 years, and would have no salvage value. The machine would reduce labor and other costs by $74,000 per year. The company requires a minimum pretax return of 12% on all investment projects.
Click here to view Exhibit 7B-1 and Exhibit 7B-2 to determine the appropriate discount factor(s) using the tables provided.
The net present value of the proposed project is closest to (Ignore income taxes.): (Round your intermediate calculations and final answer to the nearest whole dollar amount.)
- Break-Even Analysis
A production system for a new product has an initial investment cost of $240000 with an annual maintenance cost of $6000. The system is assumed to have permanent life. The production cost (operator, material, and process) of one item is $18 and the selling price is $32.
(a) Draw cash flow and break-even charts of this project and determine how many items must be sold per year just to break-even at an interest rate of 12% per year.
(b) Find the annual profit if 4000 units are sold
You are considering a proposal to produce and market a new sluffing machine. The most likely outcomes for the project are as follows:
Expected sales: 30,000 units per year
Unit price: $50
Variable cost: $30
Fixed cost: $300,000
The project will last for 10 years and requires an initial investment of $1 million, which will be depreciated straight-line over the project
life to a final value of zero. The firm's tax rate is 30%, and the required rate of return is 12%.
However, you recognize that some of these estimates are subject to error. In one scenario a sharp rise in the dollar could cause sales
to fall 30% below expectations for the life of the project and, if that happens, the unit price would probably be only $40. The good
news is that fixed costs could be as low as $200,000, and variable costs would decline in proportion to sales.
a. What is project NPV if all variables are as expected?
Note: Do not round intermediate calculations. Enter your answer in thousands not in millions…
Chapter 7 Solutions
Corporate Finance
Ch. 7 - Forecasting Risk What is forecasting risk? In...Ch. 7 - Sensitivity Analysis and Scenario Analysis What is...Ch. 7 - Prob. 3CQCh. 7 - Break-Even Point As a shareholder of a firm that...Ch. 7 - Prob. 5CQCh. 7 - Real Options Why does traditional NPV analysis...Ch. 7 - Real Options The Mango Republic has just...Ch. 7 - Prob. 8CQCh. 7 - Prob. 9CQCh. 7 - Project Analysis You are discussing a project...
Ch. 7 - Sensitivity Analysis and Break-Even Point We are...Ch. 7 - Prob. 2QAPCh. 7 - Prob. 3QAPCh. 7 - Prob. 4QAPCh. 7 - Prob. 5QAPCh. 7 - Prob. 6QAPCh. 7 - Prob. 7QAPCh. 7 - Prob. 8QAPCh. 7 - Prob. 9QAPCh. 7 - Prob. 10QAPCh. 7 - Prob. 11QAPCh. 7 - Prob. 12QAPCh. 7 - Prob. 13QAPCh. 7 - Prob. 14QAPCh. 7 - Prob. 15QAPCh. 7 - Prob. 16QAPCh. 7 - Prob. 17QAPCh. 7 - Prob. 18QAPCh. 7 - Prob. 19QAPCh. 7 - Prob. 20QAPCh. 7 - Prob. 21QAPCh. 7 - Prob. 22QAPCh. 7 - Prob. 23QAPCh. 7 - Prob. 24QAPCh. 7 - Prob. 25QAPCh. 7 - Prob. 26QAPCh. 7 - Prob. 28QAPCh. 7 - Prob. 29QAPCh. 7 - Prob. 30QAP
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