Question

Sparkling Water, Inc., expects to sell 3.7 million bottles of drinking water each year in perpetuity. This year each bottle will sell for $1.46 in real terms and will cost $.82 in real terms. Sales income and costs occur at year-end. Revenues will rise at a real rate of 1.5 percent annually, while real costs will rise at a real rate of .9 percent annually. The real discount rate is 6 percent. The corporate tax rate is 25 percent. |

What is the company worth today? |

Value of the firm =

Answer #1

Let us first find PV of revenue

PV of revenue = (No of bottle to be sold x price per bottle)/ Required rate of return - growth rate

= (3.7 million x 1.46) / 6%-1.5%

= 5.402 million / 4.5%

=$ 120.04 million

PV of cost = (No of bottle to be sold x cost per bottle)/ Required rate of return - growth rate

= (3.7 million x 0.82) / 6%-0.9%

= 3.034 million / 5.1%

=$ 59.49 million

Thus profit = 120.01 - 59.49 = 60.55 million

Thus after tax profit = 60.55 million(1-25%)

= 60.55 million(0.75)

= $ 45.42 million

Thus vale of company = $45.42 million

Sparkling Water, Inc., expects to sell 3.7 million bottles of
drinking water each year in perpetuity. This year each bottle will
sell for $1.46 in real terms and will cost $.82 in real terms.
Sales income and costs occur at year-end. Revenues will rise at a
real rate of 1.3 percent annually, while real costs will rise at a
real rate of 1.2 percent annually. The real discount rate is 8
percent. The corporate tax rate is 25 percent.
...

Sparkling Water, Inc., expects to sell 3.5 million bottles of
drinking water each year in perpetuity. This year each bottle will
sell for $1.44 in real terms and will cost $.80 in real terms.
Sales income and costs occur at year-end. Revenues will rise at a
real rate of 1.3 percent annually, while real costs will rise at a
real rate of .8 percent annually. The real discount rate is 5
percent. The corporate tax rate is 21 percent. What...

Sparkling Water, Inc., expects to sell 3.5 million bottles of
drinking water each year in perpetuity. This year each bottle will
sell for $1.44 in real terms and will cost $.80 in real terms.
Sales income and costs occur at year-end. Revenues will rise at a
real rate of 1.3 percent annually, while real costs will rise at a
real rate of .8 percent annually. The real discount rate is 5
percent. The corporate tax rate is 21 percent.
What...

The Biological Insect Control Corporation (BICC) has hired you
as a consultant to evaluate the NPV of its proposed toad ranch. The
company plans to breed toads and sell them as ecologically
desirable insect control mechanisms. They anticipate that the
business will continue into perpetuity. Following the negligible
start-up costs, the company expects the following nominal cash
flows at the end of the year:
Revenues
$
490,000
Labor costs
239,000
Other costs
88,000
The company will lease machinery...

The Biological Insect Control Corporation (BICC) has hired you
as a consultant to evaluate the NPV of its proposed toad ranch.
BICC plans to breed toads and sell them as ecologically desirable
insect control mechanisms. They anticipate that the business will
continue into perpetuity. Following the negligible start-up costs,
BICC expects the following nominal cash flows at the end of the
year:
Revenues
$
280,000
Labor costs
200,000
Other costs
70,000
The company will lease machinery for $105,000 per year....

1.
Sports utensils inc. makes water bottles for backpackers. Each
water bottle includes a one-year warranty against manufacturing
defects. The Company estimates that 3% of the water bottles sold
will be returned as defective. When in the water bottles or return
the company replaces the water bottle. Each water bottle cost $4 to
produce. In 2016, the company sold 250,000 water bottles. The
warranty expense that the company should record for
2016:
A)
$750
B)
$250,000
C)
$3,000
D)
None...

Santa Clara Electronics, Inc. of California currently exports
1,000,000 electric switches per year to the Argentina under an
import agreement that expires in five years. In the Argentina, the
imported switches are currently sold for peso equivalent of $75 per
set. Santa Clara’s costs, including shipping, are $50 per set, and
its current pre-tax profit is $25 per set. Similar costs and prices
would occur in Argentine production. The market for this type of
switch in the Argentina is stable...

Will rate, thank you.
Part 1:
A project requires an initial investment of $100,000 and is
expected to produce a cash inflow before tax of $27,500 per year
for five years. Company A has substantial accumulated tax losses
and is unlikely to pay taxes in the foreseeable future. Company B
pays corporate taxes at a rate of 34% and can depreciate the
investment for tax purposes using the five-year MACRS tax
depreciation schedule. Suppose the opportunity cost of capital is...

Note: 100% plagiarism in the above paragraph
please remove the plagiarism less than 15 %
.
CHALLENGES / OPPORTUNITIES
One of the major challenges is to change the people’s
perspective of PepsiCo as an unhealthy soft drink producer. Due to
the link of soft drinks to obesity and diabetes, the new CEO wants
to reinvent Pepsi as a healthy food producer rather than a snacks
producer. Although this is a good plan for the PepsiCo to consider,
people who are used...

Delta airlines case study
Global strategy. Describe the current global
strategy and provide evidence about how the firms resources
incompetencies support the given pressures regarding costs and
local responsiveness. Describe entry modes have they usually used,
and whether they are appropriate for the given strategy. Any key
issues in their global strategy?
casestudy:
Atlanta, June 17, 2014. Sea of Delta employees and their
families swarmed between food trucks, amusement park booths, and
entertainment venues that were scattered throughout what would...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 2 minutes ago

asked 4 minutes ago

asked 13 minutes ago

asked 32 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 2 hours ago

asked 2 hours ago

asked 2 hours ago

asked 3 hours ago

asked 3 hours ago