--%>
Assignment Help - homework help

DCF Analysis

AB Corp. is in the business of making white-board markers. They are computing the potential of investing in some new equipment that will enhance their manufacturing process.  The initial cost of the latest machinery is $470,000 plus a one-time installation cost of $5,000. All ongoing fixed costs correlated to production are $93,500 per year and variable cost of production is $0.18 per marker produced.  Sales predicts for markers are 250,000 units per year over the subsequent 5 years that is also the peak life expectancy of the new machinery.  You have signed an agreement with a third party to sell the machinery at 7.5% of initial cost (that is, excluding installation) at the end of the 5 years. The company’s needed return on this project is 12% per year, their corporate tax rate is 38% and the machinery falls into a 25% CCA class.

Based on the above details what must be the minimum selling price per marker?

   Related Questions in Corporate Finance

  • Q : Who was the first to quantify the idea

    Who was the first to quantify the idea of Brownian motion?

    		•
  • Q : Bond price problem ABC Corp is issuing

    ABC Corp is issuing a 10-year bond with a coupon rate of 7 %. The interest rate for similar bonds is at present 9 %. Supposing annual payments, what is the current value of the bond? (Round to the closest dollar.) (a) $872 (b) $1,066 (c) $990 (d) $945.

    Q : Explain the structure

    Our company (A) is going to buy the other company (B). We need to value the shares of B and, thus, we will use three options of the structure Debt/Shareholders’ Equity in order to obtain the WACC as: 1) Present structure of A

    		•
  • Q : Do expected equity flows coincide with

    Do expected equity flows coincide along with expected dividends?

    		•
  • Q : Selling or purchasing problem Atlas

    Atlas Realty Company is interested in buying a house and renting it out for $12,000 a year, collecting the rent in advance each year. This will depreciate the house over 25 years; however sell it after 15 years at twice its purchase price. The maintenance expenditures

    		•
  • Q : Data Case Please assist with the

    Please assist with the attached Data Case assignment

    		•
  • Q : How companies accuse investors make

    Sometimes, companies accuse investors of performing credit sales which they make their quotations fall. Is it true?

    		•
  • Q : Calculating the Cost of Equity You are

    You are an analyst in the financial division of Flipper Industries (FI) which has a beta of 1.80 (you are risk-philic, so you enjoy the thrill of working somewhere so risky). The company just paid a dividend of $1 and dividends are expected to grow at 5% per year. The

    		•
  • Q : What is the impact of auto portfolio

    What is the impact of auto portfolio into the quotation of the shares?

    		•
  • Q : Expected return for a portfolio What is

    What is the expected return for a portfolio consisting of 200 shares of Nike, 200 shares of Home Depot, and 400 shares of Intel if their expected returns are 10%, 8% and 12% respectively, and their current prices are $25, $50, and $25 per share respec

    		•