SolarGreen is a company that produces solar panels. It would like to bid for an order from
Question:
SolarGreen is a company that produces solar panels. It would like to bid for an order from the government. If the company wins the bid, it expects to sell 10,000 solar panels in each of the next five years. The variable cost of producing each panel is $100 and the fixed cost per year is $250,000. The initial investment costs $500,000 and will depreciate in a straight-line basis. Both the market and book value of the fixed assets will reduce to zero at the end of the fifth year. No investment in net working capital is needed. The tax rate is 40% and the required return is 20%. What should be the base bid price?
A. $179.5 B. $162.9 C. $152.9 D. $146.2 E. $135.0
11. Suppose you take a three-year loan of $100,000 at an interest rate of 10%. You make quarterly fixed principal payment. Your roommate takes a loan with the same principal, interest rate, maturity and payment frequency, but with fixed equal payments. What is the difference between the interest payment by you versus the interest payment by your roommate in the second payment?
A. $876.29 B. $27.12 C. $0.00
D. -$27.12 E. -$876.29
12. Following the previous question. Now assume that your bank requires you to make interest payment in a flat basis, which means every quarter your interest payment always equals to $100,000*(the quarterly interest rate). What is the effective annual interest rate?
A. 25.00 percent B. 18.28 percent C. 17.15 percent D. 10.47 percent E. 10.38 percent