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Company Z is considering purchasing a robotic welding machine which is estimated to reduce expenses by $54,000 per year. The machine will have no effect on revenues but is expected to pay for itself from the cost savings. The welding machine costs $126,000 and will be depreciated on a straight-line basis for 3-years ($42,000 per year at t=1, t=2, and t=3). The machine is expected to be sold after 3 years for $30,000. The purchase of the machine would require an increase in inventory of $6,000 and an increase in accounts payable of $1,000 at t=0, and the net operating working capital is expected to be recovered at t=3. Company Z’s marginal tax rate is 40%. Fill in the following information and calculate the NPV assuming the project’s cost of capital is 9%.
Year 0 Year 1 Year 2 Year 3
Operating Cash Flow ___________ ___________ __________
Capital Spending _____________ ___________
The Newton Company has 120,000 shares of stock that each sell for $65. Suppose the company issues 9,000 shares of new stock at the following prices: $65, $50, and $45. What is the effect of each of the alternative offering prices on the existing pric..
How much money can Anthony borrow at 8% interest compounded semiannually if the loan is to be repaid at half-year intervals for 12 years and he can afford to pay $483 per half-year? Round to the nearest cent as needed.
Dee's Fashions has a growth rate of 5.2 percent and is equally as risky as the market while its stock is currently selling for $28 a share. The overall stock market has a return of 12.6 percent and a risk premium of 8.7 percent. What is the expected ..
Last year, you earned 11.67 percent on your investments. During that time period, inflation averaged 6.4 percent. What was your real rate of return based on the Fisher formula?
Fred and Ingred (married) have identified five possible ways that they could effect the transfer of the deli to Molly (their daughter-in-law).Describe the transfer methods and the advantages and disadvantages to the parties.
What is the general approach to disaster recovery as specified in Schmidt? What is the role of policy in disaster recovery? Compare and contrast shared systems, hot standby systems, and cold standby systems for disaster recovery.
Jackson C (JC). is being acquired by Sampson Security (SS) for $61,676 worth of SS stock. The incremental value of the acquisition is $5,600. JC has 2,942 shares of stock outstanding at a price of $20 a share. SS has 3,441 shares of stock outstanding..
Pretty Lady Cosmetic Products has an average production process time of forty days. Finished goods are kept on hand for an average of fifteen days before they are sold. Determine the average investment in accounts receivable, inventories, and account..
Explain the automobile insurance (listed below) and provide an appropriate example of this type of insurance. Discuss the relationship between risk and this type of insurance. Describe the risk management tools. Discuss the legal principles of risk a..
Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next nine years, because the firm needs to plow back its earnings to fuel growth. The company will then pay a dividend of $14.50 per share 10 years..
You purchased 2,800 shares in the New Pacific Growth Fund on January 2, 2010, at an offering price of $55.70 per share. The front-end load for this fund is 5 percent, and the back-end load for redemptions within one year is 3 percent. If the operatin..
Florida Citrus Inc. (FCI) estimates its taxable income at $9,000,000. The company is considering expanding its product line by introducing a low-calorie sport drink for next year. It expects that the additional taxable income next year from this spor..
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