Questions from Corporate Finance

Q: An investment offers a total return of 11.7 percent over

An investment offers a total return of 11.7 percent over the coming year. Janice Yellen thinks the total real return on this investment will be only 9 percent. What does Janice believe the inflation r...

Q: You are considering a new product launch. The project will cost

You are considering a new product launch. The project will cost $1,675,000, have a four-year life, and have no salvage value; depreciation is straight-line to zero. Sales are projected at 195 units pe...

Q: Ojo Outerwear Corporation can manufacture mountain climbing shoes for $45.

Ojo Outerwear Corporation can manufacture mountain climbing shoes for $45.17 per pair in variable raw material costs and $29.73 per pair in variable labor expense. The shoes sell for $210 per pair. La...

Q: McGilla Golf has decided to sell a new line of golf clubs

McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $815 per set and have a variable cost of $365 per set. The company has spent $150,000 for a marketing study that dete...

Q: In the previous problem, you feel that the values are accurate

In the previous problem, you feel that the values are accurate to within only ± 10 percent. What are the best-case and worst-case NPVs? Problem 20: McGilla Golf has decided to sell a new line of golf...

Q: In Problem 20, McGilla Golf would like to know the sensitivity

In Problem 20, McGilla Golf would like to know the sensitivity of NPV to changes in the price of the new clubs and the quantity of new clubs sold. What is the sensitivity of the NPV to each of these v...

Q: Hybrid cars are touted as a “green” alternative; however

Hybrid cars are touted as a “green” alternative; however, the financial aspects of hybrid ownership are not as clear. Consider the 2019 Toyota RAV4 Hybrid, which had a list price of $5,900 (including...

Q: This problem concerns the effect of taxes on the various break-

This problem concerns the effect of taxes on the various break-even measures. a. Show that, when we consider taxes, the general relationship between operating cash flow, OCF, and sales volume, Q, can...

Q: Consider a project to supply Detroit with 20,000 tons of

Consider a project to supply Detroit with 20,000 tons of machine screws annually for automobile production. You will need an initial $3.1 million investment in threading equipment to get the project s...

Q: In Problem 27, suppose you’re confident about your own projections,

In Problem 27, suppose you’re confident about your own projections, but you’re a little unsure about Detroit’s actual machine screw requirement. What is the sensitivity of the project OCF to changes i...