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A portable concrete test instrument used in construction for evaluating and profiling concrete surfaces (MACRS-GDS 5-year property class) is under consideration by a construction firm for $22,500. The instrument will be used for 6 years and be worth $2,750 at that time. The annual cost of use and maintenance will be $12,000. Alternatively, a more automated instrument (same property class) available from the manufacturer costs $30,500, with use and maintenance costs of only $9,500 and salvage value after 6 years of $4,500. The marginal tax rate is 40%, and MARR is an after-tax 12%.
Determine which alternative is less costly, based upon comparison of after-tax annual worth.
Show the AW values used to make your decision:
Alternative 1: $__________
Alternative 2: $__________
On January 1, year 13, Frick Inc. redeemed its fifteen-year bonds of $500,000 par value for 102. They were originally issued on January 1, year 1, at 96 with a maturity date of January 1, year 16. Frick amortizes discounts, premiums, and bond issue c..
Consider a bond that has 20 years remaining until maturity. Par value is $1000. Annual coupon rate is 14%, with annual payments period. Assume that the prevailing annualized yield on other bonds with similar characteristics is 14%. What is the bond’s..
Akyol Corporation is undergoing a restructuring, and its free cash flows are expected to be unstable during the next few years. However, FCF is expected to be $50 million in Year 5, i.e., FCF at t = 5 equals $50 million, and the FCF growth rate is ex..
Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.58 million. The fixed asset falls into the three-year MACRS class. If the tax rate is 34 percent, what is the project’s Year 0 ne..
Company X has a $ 100 million, 2 year, 6% fixed rate semi-annual pay debt. Payments are actual count over a 360-day year. The company expects interest rates to fall and would prefer to have a floating rate debt. A $100 million, two year 5.5% semi-ann..
Five years ago BLK issued bonds with a 7 percent coupon interest rate. The bond's indenture stated that the bonds were callable after three years. So, four years later interest rates fell to 5 percent, the company called the old bonds and refunded at..
What action or actions in tort may the commercial prawn trawlers claim against Megabucks Ltd?
A stock had returns of 14 percent, 18 percent, 19 percent, -1 percent, 11 percent, and -7 percent over the last six years. What is the arithmetic return for the stock? What is the geometric return for the stock?
What is the accumulated sum of the following stream of payments? $2,004 every year at the beginning of the year for 13 years, at 4.59%. compounded annually,
Assume you stock portfolio is comprised of: 60% of your total is in a computer company stock (that has a beta of 1.3, the risk-free rate is 5%, and the expected return on the market as a whole is 11%); and 40% of your total is in the petroleum compan..
you are exploring the need for organisations to measure and manage performance against objectives, as well as the potential effectiveness of tools such as Balanced Scorecards and Strategy Maps as aids in this cause.
The price of a stock is $36 and the price of a three-month call option on the stock with a $36 strike is $3.60. Suppose a trader has $3,600 to invest and is trying to choose between buying 1,000 options (10 contracts) or 100 shares of stock. How high..
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