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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?

You own a stock that had returns of 10.48 percent, −7.26 percent,23.64 percent, and 16.06 percent over the past four years. What was the geometric average return for this stock?

Mikulec Toys has an inventory turnover of 9.1 and an accounts payable turnover of 10.6. The accounts receivable period is 32.8 days. What is the length of the cash cycle?

What is the expected return on a portfolio that is equally weighted between Stocks M and N given the following information? State of Economy Probability of State of Economy Rate of Return if State Occurs Stock M Stock N Boom .13 .18 −.14 Normal .82 .06 .06 Recession .05 −.14 .18

As of the beginning of the quarter, Callahan’s had a cash balance of $710. During the quarter, the company collected $1,860 from customers and paid suppliers $1,520. The company also paid a loan payment of $320 and a tax payment of $510. What is Callahan’s cash balance at the end of the quarter?

A project has an initial cost of $7,900 and cash inflows of $2,100, $3,140, $3,800, and $4,500 per year over the next four years, respectively. What is the payback period?

A project has cash flows of −$152,000, $60,800, $62,300, and $75,000 for Years 0 to 3, respectively. The required rate of return is 13 percent. What is the profitability index? Should you accept or reject the project based on this index value?

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?

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?

Gibson’s has sales for the year of $542,400, cost of goods sold equal to 80 percent of sales, and an average inventory of $80,400. The profit margin is 6 percent and the tax rate is 21 percent. How many days, on average, does it take the company to sell an inventory item? Assume 365 days per year.