financial management

A rapid rate of growth in sales and profits may require:
Answer
higher dividend payments to shareholders.
increased borrowing by the firm to support the sales increase.
the firm to be more lenient with credit customers.
sales forecasts to be made less frequently.

  1. 👍
  2. 👎
  3. 👁
  1. Superior Manufacturing is thinking of launching a new product. The company expects to sell $950,000 of the new product in the first year and $1,500,000 each year thereafter. Direct costs including labor and materials will be 55% of sales. Indirect incremental costs are estimated at $80,000 a year. The project requires a new plant that will cost a total of $1,000,000, which will be depreciated straight line over the next five years. The new line will also require an additional net investment in inventory and receivables in the amount of $200,000. Assume there is no need for additional investment in building and land for the project. The firm's marginal tax rate is 35%, and its cost of capital is 10%. Based on this information you are to complete the following tasks.

    Prepare a statement showing the incremental cash flows for this project over an 8-year period.

    Calculate the Payback Period (P/B) and the NPV for the project.

    Based on your answer for question 2, do you think the project should be accepted? Why? Assume Superior has a P/B (payback) policy of not accepting projects with life of over three years.

    If the project required additional investment in land and building, how would this affect your decision? Explain

    1. 👍
    2. 👎

Respond to this Question

First Name

Your Response

Similar Questions

  1. Personal Finance

    Check my work pls. 1. The components of ___ are variable costs and fixed costs. A. Entire cost B. Total cost* C. Complete cost D. Required cost 2. What is the margin of safety? A. How much sales can fall before a business starts

  2. managerial finance

    Early in 2007, Inez Marcus, the chief financial officer for Suarez Manufacturing, ws given the task of assessing the impact of a proposed risky investment on the firm's stock value. To perform the necessary analysis, Inez gathered

  3. social studies

    rapid population growth can result in large increases in the infant mortality rate if there is A. A shortage of clean food and water B. A higher consumption of goods and services C. deforestation D. increased migration

  4. Math

    Assume the carrying capacity of the earth is 9 billion. Use the 1960s peak annual growth rate of 2.1​% and population of 3 billion to predict the base growth rate and current growth rate with a logistic model. Assume a current

  1. Algebra

    Two different businesses model their profits over 15 years, where x is the year, f(x) is the profits of a garden shop, and g(x) is the profits of a construction materials business. Use the data to determine which function is

  2. finance (assumptions)

    The cost of capital for common stock is ke=(d1/Po)+g. What are the assumptions of the model? A. growth (g) is constant to infinity B. The price earnings ration stay the same C. The firm must pay a dividend to use this model D All

  3. Algebra II Help

    4) The function f(x)=2(3)^x represents the growth of a dragonfly population every year in a remote swamp. Rose wants to manipulate the formula to an equivalent form that calculates seven times a year, not just once a year. Which

  4. College Math

    Assume the carrying capacity of the earth is 8 billion. Use the 1960s peak annual growth rate of 2.1 ​% and population of 3 billion to predict the base growth rate and current growth rate with a logistic model. Assume a current

  1. Finance

    The stock price of Webber Co. is $68. Investors require an 11 percent rate of return on similar stocks. Required: If the company plans to pay a dividend of $3.85 next year, what growth rate is expected for the company’s stock

  2. Macroeconomics* Please check my answers*

    If real GDP per capita grows at a rate of 5% per year consistently over time, how many years would it take for it to double in size? 5 10 My answer 14 70 The purpose of indexing Social Security payments to the CPI is to ______.

  3. Algebra

    Two different businesses model their profits over 15 years, where x is the year, f(x) is the profits of a garden shop, and g(x) is the profits of a construction materials business. Use the data to determine which function is

  4. investment

    Would you expect the required rate rate of returns for a U.S investor in U.S common stocks to be the same as the required rate of return on Japanese common stocks? what factors would determine the require rate of return for stocks

You can view more similar questions or ask a new question.