The questions below are dealing with corporate finance and would like some help with solving them!
Forecasting risk is a concern for nancial managers because Select one: A a. the rm may not be able to correctly project its future nancing costs. A b. overly optimistic estimation of future cash ows may lead to incorrect capital budgeting decisions. -A c. forecasts by industry analysts may not agree with the rm's forecasts of its future revenues. A d. strategic options cannot be included in the capital budgeting decision criteria. A e. the investment decision process should aim to match projected cash ows with actual cash ows. Norister Inc. is considering introducing a new product line. This will require the purchase of new xed assets of $2.4 million. The company estimates that demand for the new product will be approximately 15,000 units per year, with a price per unit of $100. The variable cost of producing each unit of the product is $35, and xed costs per year will be $100,001}. Demand for the product will remain constant for six years, after which both demand and production will cease, and the associated xed assets will have no salvage value. Depreciation on the xed assets will be straight-line to zero. The company's marginal tax rate is 35%, and the required return on the project is 13%. How will the after-tax operating cash ow (ATOCF) change if the number of units sold is 10% less than the projected demand of15,000 units? Select one: A a. ATOCF will increase by 10%. A b. ATOCF will decrease by 10%. A c. ATOCF will increase by 8.94%. A d. ATOCF will decrease by 8.94%. A e. ATOCF will remain unchanged. Norister Inc. is considering introducing a new product line. This will require the purchase of new xed assets of $2.4 million. The company estimates that demand for the new product will be approximately 15,000 units per year, with a price per unit of $100. The variable cost of producing each unit of the product is $35, and xed costs per year will be $100,000. Demand for the product will remain constant for six years, after which both demand and production will cease, and the associated xed assets will have no salvage value. Depreciation on the xed assets will be straight-line to zero. The company's marginal tax rate is 35%, and the required return on the project is 13%. Due to forecasting risk, the company estimates that price per unit, variable cost, xed costs, and quantity sold could vary by $1090, $1590, $590, and $1090, respectively. What is the project's net present value in the worst case scenario? Select one: C a. -$656,606 (j b. -$543,413 [7 c. $353,020 [7 cl. $103,677 (j e. $43,502 To avoid prejudgment of risk during a simulation analysis, the discount rate used to calculate net present value should be the Select one: C\Oscar Inc. has a new product priced at $500 per unit. Variable cost is $250 per unit, and xed costs are $200,000 per yea r. Quantity sold is expected to be 20,000 units per year. The new product will require an initial investment of $14 million, depreciation will be straight-line to zero for seven years, and salvage at the end of seven years is expected to be $1 million. Demand for the product is expected to be stable and to continue for seven years. The required rate of return on this new product line is 12%. What is the cash break-even quantity? Select one: C? a. 800 (j b. 880 (j c. 3,000 (7, d. 8.800 0 e. 33,000 Oscar Inc. has a new product priced at $500 per unit. Variable cost is $250 per unit, and xed costs are $200,000 per year. Quantity sold is expected to be 20,000 units per year. The new product will require an initial investment of $14 million, depreciation will be straight-line to zero for seven years, and salvage at the end of seven years is expected to be $1 million. Demand for the product is expected to be stable and to continue for seven years. The required rate of return on this new product line is 12%. Ignoring taxes, what is the nancial break-even quantity? Select one: C\"; a. 8,800 A b. 10,295 A c. 12,674 A d.15,276 A e. 20,000 Oscar Inc. has a new product priced at $500 per unit. Variable cost is $250 per unit, and xed costs are $200,000 per year. Quantity sold is expected to be 20,000 units per year. The new product will require an initial investment of $14 million, depreciation will be straight-line to zero for seven years, and salvage at the end of seven years is expected to be $1 million. Demand for the product is expected to be stable and to continue for seven years. The required rate of return on this new product line is 12%. What is the degree of operating leverage at the expected quantity sold of 20,000 units? Select one: C\" a. 1.02 A b.1.04 C\"c.1.08 Ad.1.12 Ae.1.14 Which of the following is not a managerial option in the capital budgeting process? Select one: C a. option to abandon C b. option to wait C c. option to expand C d. strategic option C e. none ofthe above
