The Schulz Corporation has an opportunity to sell novelty security blankets Charlie Brown, the CEO, would like for Snoopy, the vice president, to evaluate the possibility of producing the novelty security blankets. Lucy Van Pelt, marketing manager, believes the candy carrots will sell for $24 each. Linus Van Pelt, marketing researcher, estimates that they will be able to sell 85,000 in year 1, 92,000 in year 2, 105,000 in year 3 and 140,000 in year 4. Woodstock, operations manager, estimates that the cost will be $12.50 per blanket plus $325,000 in fixed costs. Woodstock's research has shown that equipment to produce the blankets will cost $225,000 with installation being another $25,000 per machine. Each machine can produce 15,000 blankets. All machines purchased at time 0. Inventory will increase by $320,000. Marcie, Woodstock's assistant manager, believes the equipment will be worth $40,000 each in 4 years. Pig Pen, CFO, believes the accounts receivables will increase by $450,000 and accounts payable will increase by $175,000. Sally Brown, financial analyst, states that because of the profitability of Schulz Corporation the tax rate is a flat 35% This equipment falls under the three year MACRS schedule. Schulz Corporation bonds have 18 years till they mature. Their dividends are expected to grow at a constant 4.25%. They have 1,000,000 shares outstanding. The return on treasury bonds is 3.75%. The coup on rate on their bonds is 6.5%. Their stock sells for $28. Par value is $1000. They have 21,000 outstanding bonds. Their bonds pay semi-annual coupon payments. The dividend just paid was $2.25. Their bonds sell for $975. Their bonds can be called in 7 years with a $70 premium. The Schulz Corporation has a beta of 1.16. The expected return on the marketis 11.4%. 4 MACRS Year 1 Year 2 Year 3 Year 4 33% 45% 15% 7%

The Schulz Corporation has an opportunity to sell novelty security blankets Charlie Brown, the CEO, would like for Sno opy, the vice pres dent, to evaluate the possibility of producing the novelty security blankets. Lucy Van Pelt, marketing manager, believes the candy carrots will sell for $24 each. Linus Van Pelt, marketing researcher, estmates that they will be able to sell 85,000 : in year 1,92,000 in year 2;105,000 in year 3 and 140,000 in year 4 Woodstock, operations manager, estimates that the cost will be $12.50 per blanket plus $325,000 in fixed costs. Woodstock's research has shown that equipment to produce the blankets will cost $225,000 with installation being another $25,000 per machine. Each machine can produce 15,000 bl ankets. All machines purchased at time 0 . Inventory will increase by $320,000. Marcie, Woodstock's assistant manager, believes the equipment will be worth $40,000 each in 4 years. Aig Pen, CFO, believes the accounts receivables will increase by $450,000 and accounts payable will increase by $175,000. Sally Brown, financial andyst, states that because of the profitability of Schulz Corporation the tas rate is a flat 35%. This equipment falls under the three year MACRS schedule Schulz Corporation bonds have 18 years till they mature. Their dividends are expected to grow at a constant 4.25%. They have 1,000,000 shares outstanding. The retum on treasury bonds is 3.75%. The coup on rate on their bonds is 6.5%. Therr stock sells for $28. Par value is $1000. They have 21,000 outstanding bonds. Their bonds pay semi-annual coupon payments. The dividend just paid was $2.25. Their bonds sell for $975. Their bonds can be called in 7 years with a $70 premium. The Schulz Corporation has a beta of 1.16 . The expected return on the marketis 11.4%