Sun Brite has a new pair of sunglasses it is evaluating. The company expects to sell 7,400 pairs of sunglasses at a price of $169 each and a variable cost of $121 each. The equipment necessary for the project will cost $385,000 and will be depreciated on a straight-line basis over the 7-year life of the project. Fixed costs are $350,000 per year and the tax rate is 21 percent. How sensitive is the operating cash flow to a $1 increase in variable costs per pairs of sunglasses?

Bad Company has a new 4-year project that will have annual sales of 8,700 units. The price per unit is $20.20 and the variable cost per unit is $7.95. The project will require fixed assets of $97,000, which will be depreciated on a 3-year MACRS schedule. The annual depreciation percentages are 33.33 percent, 44.45 percent, 14.81 percent, and 7.41 percent, respectively. Fixed costs are $37,000 per year and the tax rate is 21 percent. What is the operating cash flow for Year 3?

When considering a switch from an all-cash credit policy to a net 30 credit policy all of the following should be considered except the:

A project with an initial cost of $56,000 is expected to provide annual cash flows of $14,300 over the 6-year life of the project. If the required return is 8.9 percent, what is the project’s profitability index?

Upton Umbrellas has a cost of equity of 12.9 percent, the YTM on the company’s bonds is 5.4 percent, and the tax rate is 21 percent. The company’s bonds sell for 104.5 percent of par. The debt has a book value of $447,000 and total assets have a book value of $965,000. If the market-to-book ratio is 3.13 times, what is the company’s WACC?

A portfolio consists of $14,800 in Stock M and $22,400 invested in Stock N. The expected return on these stocks is 8.70 percent and 12.30 percent, respectively. What is the expected return on the portfolio?

A stock had the following year-end prices and dividends: Year Price Dividend 0 $ 58.63 — 1 68.30 $ 1.13 2 61.70 1.31 3 69.98 1.48 What was the arithmetic average return for the stock?

If the risk premium on the stock market was 7.20 percent and the risk-free rate was 2.68 percent, what was the stock market return?

King Nothing is evaluating a new 6-year project that will have annual sales of $377,000 and costs of $264,000. The project will require fixed assets of $173,000, which will be depreciated on a 5-year MACRS schedule. The annual depreciation percentages are 20.00 percent, 32.00 percent, 19.20 percent, 11.52 percent, 11.52 percent, and 5.76 percent, respectively. The company has a tax rate of 6 percent. What is the operating cash flow for Year 3?

Guerilla Radio Broadcasting has a project available with the following cash flows : Year Cash Flow 0 −$ 15,000 1 6,200 2 7,500 3 4,900 4 4,500 What is the payback period?