Sigma industries is considering purchasing Lambda Products in a cash transaction Sigma financial analysts Dave conducted an extensive amount of negotiation and due diligence and nave summarized the following financial information for management.
• Assets having a 10-year remaining life can be acquired for $22 million
• Assets are to De depreciated over their remaining life on a straight-line basis for Doth book and tax purposes
• Current liabilities of Lambda amounting to S3 million must be assumed by Sigma
• Lambda operations are expected to produce annual pre-tax cash Don of S7 million for the remaining 10 years of operation
• A16% return on investment is required by Sigma for acquisitions of this type
• Sigma's marginal Income tax rate is 35%
What is the net present value to Sigma of the Lambda acquisition rounded to the nearest thousand?
A retail company sells numerous products m its one department store. The income statements tot two of these products are shown below
After reviewing the income statements, the president is considering drooping one or both products. Which produces), if any should the company discontinue?
It there is sufficient capacity to fill the order, which of the following are relevant for a special order decision?
A corporation’s financial analyst has identified four potential protects that ate mutually exclusive. Each protect will produce a constant annual cash flow for years 1 through 4, and have an initial investment at time 0 shown below. If the corporation has a weighted average cost of capital of 10%, which project should be selected?
An accountant is employed in the financial reporting department of a publicly-traded company. The company s compensation plan includes a year-end bonus based on the entity's financial performance and stock option rewards based on individual performance Using iMAs Statement of Ethical Professional Practice, identify the ethical Issues, if any, that may Be presented by this company s compensation plan.
K Malone is a successful entrepreneur, Currently she is considering investing in a capital protect, which would benefit tourism in North Caroina Because of tourism, the State of North Carolina is willing to lent) her $150,000 at a rate of 5%. well below the market rate Her estimated net cash flows for the 3-year lifetime of the project are S15 000 $89,000 and $60,000 respectively Recommend whether or not Malone should undertake this project.
FumiSelf is a global manufacturer of consumer-assembled furniture with a business presence in nearly every country. The Vice President of Production was presented with the following information by the Vice President of Finance as of the end of the current quarter.
London Corporation has in the following cost structure for two of its product.
Assume that me current sales level is 15,000 units of Product A and 5,000 units of Product B Using
cost-volume-profit analysis which of the following courses of action would maximize profit in the short term? Assume that fixed costs are sunk costs in the short term.
In March 20X2, an investor purchased a government bond with a face value of $100 that matures in 30 years. The issue price was $94 and the bond offered a yield to maturity of 5.6% One year later, the investor sold the bond at a price of S105 after receiving an interest payment of $6. The total return is
Clark inc, expects to incur the following selected costs an a new product being planned for introduction early next.
Design an development costs of $100,000 that will be incurred this year.
Marketing costs of $50,000 to be incurred %50 this year %50 year
Manufacturing costs of $500,000 to be incurred next year.
In addition to external market factors, the pricing decision should be based on cost. The product cost that should be used is
