A stock has an expected rate of return of 9.8 percent and a standard deviation of 15.4 percent. Which one of the following best describes the probability that this stock will lose at least half of its value in any one given year?

Consider a project to supply 70 million postage stamps annually for the next five years. You have an idle parcel of land available that cost $279,000 five years ago; if the land were sold today, it would net you $310,000, aftertax. You estimate the land can be sold for $400,000 after taxes in five years. You will need to install $1,867,000 in new manufacturing plant and equipment to actually produce the stamps; this plant and equipment will be depreciated straight-line to zero over the project’s five-year life. Ignore bonus depreciation. The equipment can be sold for $950,000 at the end of the project. You will also need $32,000 in initial net working capital for the project, and an additional investment of $5,000 every year starting with Year 1. All net working capital will be recovered when the project ends. Your production costs are .21 cents per stamp, and you have fixed costs of $440,000 per year. Assume the tax rates are suddenly increased such that a tax rate of 35 percent is once again applicable, and your required return on this project is 14 percent. What bid price per stamp should you submit?

The amount that O’Leary’s purchases from its suppliers each quarter equals 61 percent of the next quarter’s forecasted sales. The payables period is 60 days. Wages, taxes, and other expenses are 18 percent of sales, and interest and dividends are $72 per quarter. No capital expenditures are planned. The projected sales for Year 1 are $730, $770, $710, and $850 for Quarters 1 to 4, respectively. Sales for the first quarter of Year 2 are projected at $760. What is the amount of the total disbursements for Quarter 3 of Year 1?

Bubbly Waters currently sells 530 Class A spas, 680 Class C spas, and 430 deluxe model spas each year. The firm is considering adding a mid-class spa and expects that if it does, it can sell 605 units per year. However, if the new spa is added, Class A sales are expected to decline to 340 units while the Class C sales are expected to increase to 705. The sales of the deluxe model will not be affected. Class A spas sell for an average of $16,500 each. Class C spas are priced at $8,300 and the deluxe models sellfor $19,300 each. The new mid-range spa will sell for $10,300. What annual sales figure should you use in your analysis?

You are the manager of a project that has a degree of operating leverage of 1.84 and a required return of 15 percent. Due to the current state of the economy, you expect unit sales to decrease by 3.5 percent next year. What change should you expect in the operating cash flows next year given your sales prediction?

Alumak, Incorporated, uses high-tech equipment to produce specialized products. Each one of its machines costs $55,000 to purchase plus an additional $6,000 per year to operate. The machines have a four-year life after which they are worthless. What is the equivalent annual cost of one of these machines if the required return is 15 percent?

Hatch Idea Labs purchased some equipment two years ago for $287,600. These assets are classified as five-year property for MACRS. The MACRS rates are .2, .32, .192, .1152, .1152, and .0576, for Years 1 to 6, respectively. The company is currently replacing this equipment so the old equipment is being sold for $150,000. What is the aftertax salvage value from this sale if the tax rate is 21 percent and no bonus depreciation is claimed?

Webster’s has sales of $798,000 and a profit margin of 6.8 percent. The annual depreciation expense is $82,600. What is the amount of the operating cash flow if the company has no long-term debt?

A firm’s total investment in accounts receivables depends primarily on the firm’s:

BrummittCorporation is evaluating a new 4-year project. The equipment necessary for the project will cost $2,300,000 and can be sold for $293,000 at the end of the project. The asset is in the 5-year MACRS class. The depreciation percentage each year is 20.00 percent, 32.00 percent, 19.20 percent, 11.52 percent, and 11.52 percent, respectively. The company’s tax rate is 21 percent. What is the aftertax salvage value of the equipment?