Company is evaluating continuous baking oven

Assignment Help Financial Management

Reference no: EM131063232

A company is evaluating a continuous baking oven. New oven would cost $685,000, including cost of equipment, shipping and installation. No increase in capcity with new oven, however operating expenses would be reduced by $105,000. 7 year MACRS schedule to a value of zero will be used, however the oven can be sold in year 10 for $30,000. Cost will increase by 5% per year over the 10 year economic life. Given partial balance sheet: Current liabilities= $1,000,000; Mortage Bond= $5,143,000; Common Stock(500,000 shares)= $500,000; Contributed capital in excess of par= 2,000,000; Retained earnings= $8,640,210; total liablities and common equity= $17,283,210 Cost of capital= 11.27% Tax Rate= 35% What is the NPV of the oven?

Reference no: EM131063232

Questions Cloud

What is the equivalent annual cash flow for new mini tractor : When to replace an asset: Nemo Haulers is considering whether to purchase a new mini tractor for moving furniture within its warehouse. Nemo calculates that its current mini tractor generates $3,100 of cash flow per year. What is the equivalent annua..

What is the current share price : Bui Corp. pays a constant $13.30 dividend on its stock. The company will maintain this dividend for the next seven years and will then cease paying dividends forever. If the required return on this stock is 10 percent, what is the current share price..

What is lenovos point of differentiation : What is Lenovo's point of differentiation? Innovation? Efficiency? Both - would Lenovo use ThinkPad to build the Lenovo brand? Could it do so without hurting the ThinkPad franchise?

Pool with a dangerous drain cover : 1. If a hotel hosts a pool with a dangerous drain cover, and someone dies due to the drain cover, what sort of liability? Ignore criminal issues related to the new law passed, and focus on civil liability under torts and negligence.

Company is evaluating continuous baking oven : A company is evaluating a continuous baking oven. New oven would cost $685,000, including cost of equipment, shipping and installation. No increase in capcity with new oven, however operating expenses would be reduced by $105,000.

Explain how black holes can be detected : Using information from the textbook and the internet, research black holes. Explain how black holes can be detected.

Shows the profit and loss from the strategy : A six month call with strike price of $50 costs $5. A six month put with a strike price of $40 costs $3. The current stock price is $48. A trader uses the options and stock to create a strategy that requires long 50 shares, short 100 call options, an..

What is the value of a one year european put option : A stock price is currently $50. Over each of the next two six-month periods it is expected to go up by 15% or down by 10%. The risk-free interest rate is 5% per annum with continuous compounding. What is the value of a one year European put option wi..

Why is this statement a misconception : "A black hole is a giant vacuum cleaner, sweeping up matter across wide portions of space." Why is this statement a misconception?

User Account

All Pages