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The president of Lowell Inc. has asked you to evaluate the proposed acquisition of a new computer. The computer's price is $60,000, and it falls into the MACRS 3-year class (33% in year 1, 45% in year 2, 15% in year 3, and 7% in year 4). Purchase of the computer would require an increase in net operating working capital of $2,000. The computer would increase the firm's before-tax revenues by $20,000 per year but would also increase operating costs by $5,000 per year. The computer is expected to be used for 4 years and then be sold for $25,000. The firm's marginal tax rate is 40 percent, and the project's cost of capital is 14 percent. What is the net investment required at t = 0?
a. -$42,000
b. -$62,000
c. -$38,600
d. -$37,600
e. -$36,600
An Italian company is considering expanding the sales of its cappuccino machines to the U.S market. As a result, the idea of a setting up a manufacturing facility in the U.S should be explored. Why APV model is better than NPV model for capital budge..
_____ is a variable that responds to the actual bank's tools and indicates the stance of monetary policy.
Gordon Powles works for Creighton Capital Management and manages endowments and trusts for large clients. The fund invests most of its portfolio in S&P 500 stocks, keeping some cash to facilitate purchases and withdrawals. A colleague of Powles, Mari..
Suppose that you buy a two-year 8.1% bond at its face value. What will be your nominal return over the two years if inflation is 3.1% in the first year and 5.1% in the second? What will be your real return?
Muntjac Corporation's flexible budget cost formula for indirect materials, a variable cost, is $0.75 per unit of output. Assume that actual units produced equals standard units produced. If the company's performance report for last month shows a $250..
The security market line (SML) provides the relationship between risk and required rate of return. Which of the following statements about the SML is most correct? The relevant risk is portfolio risk, which is measured by beta The relevant risk is to..
Suppose that you have placed money in 2 Funds: Fund A and Fund B. Fund A accumulates at 9% effective and Fund B at 8% effective. At the end of 10 years, the total of the two funds is 52,000. At the end of 8 years, the amount in Fund B is three times ..
Debt to assts=60%, quick ratio= 1.1, asset turnover=5x, fixed asset turnover=12.037x, current ratio=2, average collection period=17.071 days. cash________, receivables________, inventory__________, total current assets___________, plant and equipment..
Crosby Industries has a debt-equity ratio of 1.6. Its WACC is 10 percent, and its cost of debt is 7 percent. There is no corporate tax. What is Crosby’s cost of equity capital? What would the cost of equity be if the debt-equity ratio were 0.4? What ..
Exhibit 1.29 presents common-size and percentage change balance sheets and Exhibit 1.30 (page 81) presents common-size and percentage change income statements for Starbucks for2009–2012. Net earnings as a percentage of total revenues increased from 3..
Name three controls of weather and climate.
Talbot Enterprises recently reported an EBITDA of $7.0 million and net income of $2.45 million. It had $2.59 million of interest expense, and its corporate tax rate was 30%. What was its charge for depreciation and amortization?
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