You own a wholesale plumbing supply store. The store currently generates revenues of $1.01 million per year. Next year, revenues will either decrease by 10.5% or increase by 5.4%, with equal probability, and then stay at that level as long as you operate the store. You own the store outright. Other costs run $890,000 per year. There are no costs to shutting down; in that case you can always sell the store for $210,000. What is the business worth today if the cost of capital is fixed at 9.7%? (Hint: Make sure to round all intermediate calculations to at least four decimal places.) What is the business worth today if the cost of capital is fixed at 9.7%? Today the business is worth $ (Round to the nearest dollar.)

You own a wholesale plumbing supply store. The store currently generates revenues of $1.01 million per year. Next year, revenues will either decrease by 10.5% or increase by 5.4%, with equal probability, and then stay at that level as long as you operate the store. You own the store outright. Other costs run $890,000 per year. There are no costs to shutting down; in that case you can always sell the store for $210,000. What is the business worth today if the cost of capital is fixed at 9.7%? (Hint: Make sure to round all intermediate calculations to at least four decimal places.) What is the business worth today if the cost of capital is fixed at 9.7%? Today the business is worth $ (Round to the nearest dollar.)

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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You own a wholesale plumbing supply store. The store currently generates revenues of $1.01 million per year. Next year, revenues will either decrease by 9.6% or increase by 4.6%, with equal probability, and then stay at that level as long as you operate the store. You own the store outright. Other costs run $870,000 per year. There are no costs to shutting down; in that case you can always sell the store for $540,000. What is the business worth today if the cost of capital is fixed at 9.8%? (Hint: Make sure to round all intermediate calculations to at least four decimal places.) Question content area bottom Part 1 What is the business worth today if the cost of capital is fixed at 9.8%? Today the business is worth $. . enter your response here
You own a wholesale plumbing supply store. The store currently generatesrevenues of $1 million per year. Next year, revenues will either decrease by 9.6% orincrease by 4.8%, with equal probability, and then stay at that level as long as youoperate the store. You own the store outright. Other costs run $880,000 per year. Thereare no costs to shutting down; in that case you can always sell the store for $510,000.What is the business worth today if the cost of capital is fixed at 9.6%?
K You own a wholesale plumbing supply store. The store currently generates revenues of $1.01 million per year. Next year, revenues will either decrease by 9.6% or increase by 4.9%, with equal probability, and then stay at that level as long as you operate the store. You own the store outright. Other costs run $870,000 per year. There are no costs to shutting down; in that case you can always sell the store for $520,000. What is the business worth today if the cost of capital is fixed at 10.4% ? (Hint: Make sure to round all intermediate calculations to at least four decimal places.) HIID What is the business worth today if the cost of capital is fixed at 10.4%? Today the business is worth $ (Round to the nearest dollar.)
You are currently a worker earning $60,000 per year but are considering becoming an entrepreneur. You will not switch unless you earn an accounting profit that is on average at least as great as your current salary. You look into opening a small grocery store. Suppose that the store has annual costs of $150,000 for labor, $50,000 for rent, and $30,000 for equipment. There is a one-half probability that revenues will be $210,000 and a one-half probability that revenues will be $400,000. Instructions: Enter your answers as a whole number. If you are entering any negative numbers be sure to include a negative sign (−) in front of those numbers. Enter a loss as a negative number. a. In the low-revenue situation, what will your accounting profit or loss be? $ What will your accounting profit or loss be in the high-revenue situation? $ b. On average, how much do you expect your revenue to be? $ Your accounting profit? $ Your economic profit? $…
You manage an ice cream business and want to buy a new store from which to operate. The sales price of the new building is 800 kEUR, which you finance from equity. After 3 years you sell the building for its original purchase price. Accounting rules do not allow you to depreciate real estate. Projected sales from the new building for the first year are 480 kEUR, which is expected to grow by 5% every year. The wholesale value of the ingredients as well as overhead is 40% of your sales every year. You need to keep inventory of 10% of sales in order to ensure smooth operation of the store. Inventory needs to be available at the beginning of each fiscal year. At the end of the project, after 3 years, the inventory (fresh milk and such) is worth nothing, and the firm is not going to buy inventory for the time after it has sold the building. Your customers pay cash, and you also pay cash for the ingredients on the wholesale market. Corporate tax is 20%, and the cost of equity capital is 13%.…
You are thinking of opening a small copy shop. It costs $5500 to rent a copier for a year, and it costs $0.03 per copy to operate the copier. Other fixed costs of running the store will amount to $450 per month. You plan to charge an average of $0.10 per copy, and the store will be open 365 days per year. Each copier can make up to 100,000 copies per year. a) For a charge per copy between $0.07 to $0.11 and daily demands of 500, 1000, 1500, and 2000 copies per day, find annual profit. That is, find annual profit for eachof these combinations of charge per copy and daily demand. b) If you charge 0.09 per copy, what daily demand for copies will allow you to break even? c) Graph profit as a function for a charge per copy (between $0.07 to $0.11) for a daily demand of 500 copies; for a daily demand of 2000 copies. Interpret your graphs and label your graphs properly
You own a bakery that operates 365 days per year, and want to purchase a commercial oven for $3000, which includes free delivery and installation. The manufacturer says it should last for 10 years. Operating and maintenance cost for the oven is $1400 per year. To offset these, you are estimating that you will be able to make $45 per day after eliminating cost of ingredients and other overhead. Use Present Worth method to see if you should buy the oven if your MARR is 15%.
If you buy the new machine you will be able to sell the existing machine for $6,000. The new machine will cost $10,000 for delivery and installation, on top of the purchase price. Making your product more quickly is important because you currently cannot meet the demands of your orders. You are currently selling every widget you produce. The machine will cost $100,000 today and will require annual maintenance of $5,000 each year (except for the final year), starting at the end of the first year. You expect that your machine will last for 8 years before you need to purchase the next machine. At that time, you expect you will be able to sell the machine for $7,800. You can buy the machine now and have it delivered and installed by tomorrow. You expect that you will sell 2,000 more widgets in year 1 and that this number will increase by 20% each year for the next 4 years after that before leveling off at that level of sales for the remaining years you own the machine. You can obtain more…
Suppose that your local coffee shop estimates earning the following revenue from customers for the next five years: 194, 301, 392, 501, 580. The business will face the following costs over the same five years to service the customers: 51, 39, 30, 19, 12. There is a one-time cost of $ 1,050 to acquire the customers. Assume a 100% retention rate of the customers and no discounting of future profit. What is the customer lifetime value over the five-year period? Round answer to the nearest whole number.
Beryl's Iced Tea currently rents a bottling machine for $53,000 per year, including all maintenance expenses. It is considering purchasing a machine instead, and is comparing two options: a. Purchase the machine it is currently renting for $150,000. This machine will require $20,000 per year in ongoing maintenance expenses. b. Purchase a new, more advanced machine for $255,000. This machine will require $17,000 per year in ongoing maintenance expenses and will lower bottling costs by $12,000 per year. Also, $38,000 will be spent upfront training the new operators of the machine. Suppose the appropriate discount rate is 8% per year and the machine is purchased today. Maintenance and bottling costs are paid at the end of each year, as is the rental of the machine. Assume also that the machines will be depreciated via the straight-line method over seven years and that they have a 10-year life with a negligible salvage value. The corporate tax rate is 28%. Should Beryl's Iced Tea continue…
Chauhan Restaurant is considering the purchase of a soufflé maker that costs $11,100. The soufflé maker has an economic life of 8 years and will be fully depreciated by the straight-line method. The machine will produce 1,600 soufflés per year, with each costing $2.80 to make and priced at $4.75. The discount rate is 12 percent and the tax rate is 25 percent. What is the NPV of the project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV
Beryl's Iced Tea currently rents a bottling machine for $52,000 per year, including all maintenance expenses. It is considering purchasing a machine instead, and is comparing two options: a. Purchase the machine it is currently renting for $150,000. This machine will require $23,000 per year in ongoing maintenance expenses. b. Purchase a new, more advanced machine for $255,000. This machine will require $15,000 per year in ongoing maintenance expenses and will lower bottling costs by $12,000 per year. Also, $35,000 will be spent upfront training the new operators of the machine. Suppose the appropriate discount rate is 8% per year and the machine is purchased today. Maintenance and bottling costs are paid at the end of each year, as is the rental of the machine. Assume also that the machines will be depreciated via the straight-line method over seven years and that they have a ten-year life with a negligible salvage value. The corporate tax rate is 20%. Should Beryl's Iced Tea…

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