We are evaluating a project that costs $2,220,000, has a 8-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 94,700 units per year. Price per unit is $39.03, variable cost per unit is $24.10, and fixed costs are $869,000 per year. The tax rate is 23 percent, and we require a return of 11 percent on this project.
Required:
a. Calculate the base-case operating cash flow and NPV. (Do not round intermediate calculations and round your answers to 2 decimal places, e. g., 32.16.)b. What is the sensitivity of NPV to changes in the sales figure? (Do not round intermediate calculations and round your answer to 3 decimal places, e. g., 32.161.)c. If there is a 300-unit decrease in projected sales, how much would the NPV change? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e. g., 32.16.)d. What is the sensitivity of OCF to changes in the variable cost figure? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to the nearest whole number, e. g., 32.)

Afirm's before-tax cost of debt, rd, is the interest rate that the firm must pay on debt. because interest is tax deductible, the relevant cost of debt used to calculate a firm's wacc is the cost of debt, rd (1 – t). the cost of debt is used in calculating the wacc because we are interested in maximizing the value of the firm's stock, and the stock price depends on cash flows. it is important to emphasize that the cost of debt is the interest rate on debt, not debt because our primary concern with the cost of capital is its use in capital budgeting decisions. the rate at which the firm has borrowed in the past is because we need to know the cost of capital. for these reasons, the on outstanding debt (which reflects current market conditions) is a better measure of the cost of debt than the . the on the company's -term debt is generally used to calculate the cost of debt because more often than not, the capital is being raised to fund -term projects. quantitative problem: 5 years ago, barton industries issued 25-year noncallable, semiannual bonds with a $1,600 face value and a 8% coupon, semiannual payment ($64 payment every 6 months). the bonds currently sell for $845.87. if the firm's marginal tax rate is 40%, what is the firm's after-tax cost of debt? round your answer to 2 decimal places. do not round intermediate calcu

Acoase solution to a problem of externality ensures that a socially efficient outcome is to

With signals from no-claim bonuses and deductibles, a. the marginal cost curve for careful drivers lies to the left of the marginal cost curve for aggressive drivers b. auto insurance companies insure more aggressive drivers than careful drivers because aggressive drivers have a greater need for the insurance c. the market for car insurance has a separating equilibrium, and the market is efficient d. most drivers pay higher premiums than if the market had no signals