Considering the purchase of new rapid diagnostic machine
Course:- Financial Management
Reference No.:- EM131328970

Assignment Help
Expertsmind Rated 4.9 / 5 based on 47215 reviews.
Review Site
Assignment Help >> Financial Management

1. Hawkeye Harvesters, Inc. is engaged in a contract with the United States Government to supply farm machinery. Hawkeye’s required return is 11.2%. Their marginal tax rate is 35%. HHI must have $100,000 in working capital at the start of the project and must add $10,000 to working capital at the start of years 2, 3, 4, and 5. The project will be discontinued after 5 years with no salvage value on any equipment. What is the effect on NPV of net working capital?

There is no effect on NPV

NPV is reduced by $40,000.

NPV is reduced by $48,554.

NPV is increased by $140,000.

None of the above are within $100 of the correct answer.

2. The De Falla Threecorner Hat Co. has two mutually exclusive possible investments. In the first investment, they will have a cost of $40,000 today, and then will receive payments of $19,000 at the end of each of the next three years. The alternative investment will cost $25,000 today, and then De Falla will receive payments of $13,000 at the end of each of the next three years. At what required rate of return would the two investments have the same NPV?






3. Dublin Methodist Hospital is considering the purchase of a new rapid diagnostic machine. The system will cost $400,000 and will be depreciated straight-line to zero over its five-year life. It will be worth $50,000 at the end of that time. The hospital will save $130,000 per year in laboratory costs and will also be able to reduce their inventory of lab supplies by $50,000 upon purchasing the new machine. If the tax rate is 35%, what is the IRR for this project?






Put your comment

Ask Question & Get Answers from Experts
Browse some more (Financial Management) Materials
What balance sheet format does your company use? What is the company's largest current asset and largest current liability at year end? Compute the current ratio at year end.
Taussig Technologies Corporation (TTC) has been growing at a rate of 20% per year in recent years. This same growth rate is expected to last for another 2 years, then decline
A company pays a $0.50 dividend. The dividend is expected to grow at a 20% rate for the next two years. Thereafter, over the subsequent three years, its growth should decline
A 5.75 percent coupon bond with 12 years left to maturity is offered for sale at $978.83. What yield to maturity is the bond offering? (Assume interest payments are paid semi-
Ramstucky Corp bonds just paid their annual coupon of 4%. They mature in 6 years. The required rate of return on the bonds is 5%. So it’s a $10,000 bond selling for $9,000. Th
Assume that you are considering the purchase of a 11-year, no callable bond with an annual coupon rate of 8.60%. The bond has a face value of $1000, and it makes semi-annual i
Hose plc presently has a capital structure which is 30% debt and 70% equity. The cost of debt before taxes is 8% and for equity 15%. The firm's future cash flows, after tax bu
Four years ago, your firm issued $1,000 par, 25-year bonds, with a 7 percent coupon rate and a 10 percent call premium. If these bonds are now called, what is the approximate