Practice questionsBu2004

Practice questionsBu2004 - Applied Financial Management...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Applied Financial Management 2 / 4 QUESTION 1 (Answer All Parts) Bob’s Bananas has come up with a new product, the Banana Chip. Bob paid $100,000 for a marketing study of the product and its target market. The study estimates sales of $200,000 per annum for four years. The fixed costs would be $150,000 per year and variable costs amount to 15% of sales. The chip producing machine incorporating an instant dry freeze module will cost $220,000. The machine will be depreciated straight line over four years and is expected to sell for its removal cost at the end of the project. Bob’s has a corporate tax rate of 30%. Assume a risk adjusted discount rate of 12%. Required : Compute the NPV and estimate the IRR (12 marks) QUESTION 2 (Answer all parts) (a) If the shareholders in Bob’s Bananas, an ASX Top 200 company, hold a diversified portfolio, describe the risk they need to be compensated for when holding ordinary shares? (2 marks)
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 01/17/2012 for the course BUSINESS BU2005 taught by Professor Smith during the Three '10 term at Bond College.

Page1 / 2

Practice questionsBu2004 - Applied Financial Management...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online