Nowater Filters Ltd has recently completed a $50,000 marketing study. Based on the results, Nowater has estimated that 10,000 of its new water filters could be sold annually over the next four years at a price of $150 each. Variable costs per filter would be $100, and fixed costs would total $300,000 per year. Start-up…
Quick Wash Ltd, a suburban car washing franchise, is struggling to cope with the demand following the introduction of water restrictions. The management is considering the purchase of an additional washing bay and machine. Two models have been evaluated as suitable for their needs. The ‘BloDry’ costs $60,000 to purchase and $6,000 a year to…
I. Define and distinguish between a: a. Rights Issue and Share Issue. Rights issue is an issue of shares to existing shareholders in proportion to their existing shareholding where they have the right to purchase these shares at a lower subscription price than the market price. This protects their proportionate interests in the company. Raising…
Sun Industries is considering the expansion of its operation by extending its plant. The new plant, with a life of 10 years, will cost $1,500,000 to build on existing land owned by Sun. The plant will have zero scrap value. The land has an estimated market value of $750,000. Additional spare parts of $150,000 and…
Always A Winner Ltd. is considering expanding its gambling network. The Managing Director of the company, Mr GG, has offered you a good tip for the races if you could provide information on the appropriate ‘discount rate’ for calculating the viability of the proposed project. To help you with your calculations, he has tabled the…
Keith will be starting a 6-month live in training course in 4 months’ time. His mother, Karen, has promised him a living allowance of $300 per month to help support him during this time. If the interest rate is 8 percent per annum, compounding monthly how much money will Karen need to set aside today…
The directors of a public company are not convinced that they should follow a consultant’s recommendation to buy back equity. The company has insufficient cash to finance the buy back and therefore debt funds would have to be raised to implement the recommendation. The consultants provided a simplified commencing balance sheet (before the buy back)…
Answer the following questions a) What are the potential advantages and disadvantages to a company’s shareholders if the company increases the proportion of debt in its capital structure? Present value of the tax benefit from the future interest payments. Compared to Greater Financial Risk b) Distinguish between: business risk, financial risk and default risk. a….
A friend asks you about the following terms. Answer your friend by giving a definition or/and example or/and explaining each of the following terms • Risk Averse Investor – One who dislikes risk • Systematic Risk – market related or non- diversifiable risk • Dividend Yield – dividend per share divided by share price •…
Up The Creek Adventure Company has had great success since first going public and issuing ordinary shares three years ago. Earnings and dividends have increased by 50 percent in each year and are expected to do so for two more years. Starting with the third year, growth is expected to fall to a more normal…
