Considering the purchase of new plastic stamping machine

Assignment Help Financial Management
Reference no: EM13874638

Big Steve's, makers of swizzle sticks, is considering the purchase of a new plastic stamping machine. This investment requires an initial outlay of $105,000 and will generate net cash inflows of $20,000 per year for 9 years.

1. If the discount rate is 17%, then the projects NPV is ___? (round to the nearest dollar) Should the project be accepted and why or why not?

2. What is the projects internal rate of return? Should the project be accepted? Why or why not?

Reference no: EM13874638

Questions Cloud

Compare and contrast the nature of the outsider status : Compare and contrast the nature of the Outsider status
Write down an algebraic form of a cost function : Standard empirical analysis of learning by doing estimates a "progress ratio" that is the reduction in a firm's average costs. Write down an algebraic form of a cost function which would have a constant "progress ratio."
What does an editor do : Write a mock one-page job ad for a video editor job on an upcoming Hollywood film currently in production. Using several quotes and analysis/what you learned from the documentary, accurately describe what the job would hypothetically entail.
What is a ccd : Which of the following is a key area of focus and a common source of error in most hospitals? In a health care setting, what is a CCD
Considering the purchase of new plastic stamping machine : Big Steve's, makers of swizzle sticks, is considering the purchase of a new plastic stamping machine. This investment requires an initial outlay of $105,000 and will generate net cash inflows of $20,000 per year for 9 years. What is the projects inte..
Describe the major components of an effective training plan : Demonstrate the importance of the topics to the organization and to the individual. Describe the major components of an effective training plan. Address what the organization will gain in offering the training and how the training meets professiona..
Evaluating proposed expansion-incremental free cash flow : Mersey Chemicals manufactures polypropylene that it ships to its customers via tank car. Currently, it plans to add two additional tank cars to its fleet four years from now. When evaluating the proposed expansion, what incremental free cash flows sh..
Approach to prevention and control of the disease : In 2-3 paragraphs, summarize the historical approach to prevention and control of the disease. In 2-3 paragraphs, summarize the current approach to prevention and control of the disease
What is its current share price : Solinux, Inc., is a young start-up company and will not pay dividends on its stock for the next 8 years, since the firm needs to slow back its earnings to fuel growth. The company will then pay a $2.22 per share dividend in year 9 and will increase t..

Reviews

Write a Review

 

Financial Management Questions & Answers

  Compute the expected share price

Suppose the dividends for the Seger Corporation over the past six years were $1.02, $1.10, $1.19, $1.27, $1.37, and $1.42, respectively. Compute the expected share price at the end of 2014 using the perpetual growth method. Assume the market risk pre..

  Calculate percent interest rate or effective cost of loan

The following are three one year "discount" loans that a bank might offer to the customer. Determine the amount of interest the bank would make on each loan and indicate the amont of net proceeds that the bank would pay our on each loan. On which loa..

  Explain comprehensive major medical policy

Nick an dSheila Preston are married and have purchased a comprehensive major medical policy which covers them and their two sons, Wally and Brent.

  Assume that the risk-free rate has not changed

On Oct 10, 2015, gold on the spot market is at $1,000 an ounce. A forward gold contract for delivery of gold on Oct 10, 2016 is priced at $1,030. Three months pass and spot gold is still at $1,000. What should be the approximate price of the Oct 10, ..

  What is the quivalent annual cost of the battery

University of Texas is considering purchasing a battery. The battery costs $36, has a useful life of 3 years, and will cost $100 per year to keep changed. The battery uses straight line depreciation and the salvage value is zero at the end of year 3...

  What is the expected return on the market and risk-free rate

You have been given the following information on two corporations; you are to assume that the securities are correctly priced. My Corp, Inc. has a Beta of 1.35 and an Expected Return of .075; Your Corp, Inc. has a Beta of .65 and an Expected Return o..

  What is the amount of net fixed assets

Pearce’s has a long-term debt ratio of .45 and a current ratio of 1.25. Current liabilities are $875, sales are $5,780, profit margin is 9.5%, and ROE is 18.5%. What is the amount of net fixed assets?

  Decreasing the interest rate

All else equal, the future value of a lump-sum amount invested today will increase if this happens Decreasing the interest rate, Decreasing the amount of the lump sum investment

  Assume a required rate of return on the bond

What is the value of a bond that has a par value of $1000, a coupon rate of 17.24% paid annually and that matures in 8 years? (Assume a required rate of return on the bond is 13.53 percent.)

  Exchange rates and market rates

What do you call a check that a bank writes on its own account made payable to a third party on your behalf? The FDIC and NCUA insure non-retirement accounts in banks, savings & and loans, and credit unions for up to: Assume the following exchange ra..

  Equilibrium with required return equal to expected return

Simpkins Corporation does not pay any dividends because it is expanding rapidly and needs to retain all of its earnings. However, investors expect Simpkins to begin paying dividends, with the first dividend of $1.25 coming 3 years from today.

  The market risk premium remains constant

Stock A has a beta of 1.2 and a standard deviation of returns of 14%. Stock B has a beta of 1.8 and a standard deviation of returns of 18%. If the risk free rate of return increases and the market risk premium remains constant, then _________

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd