A direct sale by an American firm to a customer abroad, with terms of payment commonly based on an irrevocable letter of credit, is an import sale

The after-tax operating cash flows in euros for the Fontenot Company are:

Linda Pyle is head of analyst recruiting for PPA Securities. She has been very frustrated by the number of job applicants who, in spite of their stellar pedigrees, seem to have little understanding of basic financial concepts. Pyle has written a set of conceptual questions and simple problems for the human resources department to use to screen for the better candidates in the applicant pool. A few of her corporate finance questions and problems are given below. Concept 1. “A company invests in depreciable assets, financed partly by issuing fixedrate bonds. If inflation is lower than expected, the value of the real tax savings from depreciation and the value of the real after-tax interest expense are both reduced.” Concept 2. “Sensitivity analysis and scenario analysis are useful tools for estimating the impact on a project’s NPV of changing the value of one capital budgeting input variable at a time.” Concept 3. “When comparing two mutually exclusive projects with unequal lives, the IRR is a good approach for choosing the better project because it does not require equal lives.” Chapter 2 Capital Budgeting 19 part-i-02 13 January 2012; 10:13:21 Concept 4. “Project-specific betas should be used instead of company betas whenever the risk of the project differs from that of the company.” Problem. “Fontenot Company is investing h100 in a project that is being depreciated straight-line to zero over a two-year life with no salvage value. The project will generate earnings before interest and taxes of h50 each year for two years. Fontenot’s weighted average cost of capital and required rate of return for the project are both 12 percent, and its tax rate is 30 percent. A. 50 in both years. B. 70 in both years. C. 85 in both years.

Which of the following distribution functions are generally not provided by retailers for their manufacturer/wholesaler suppliers?

a. contact with the final customer b. inventory storage prior to sale c. pre-paying for merchandise in advance of its being sold to final consumers d. delivery and installation of goods to final consumers