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QUESTION 1
Jarum Industrial Tools is considering a 3-year project to improve its production efficiency. Buying a new machine press for RM611,000 is estimated to result in RM193,000 in annual pretax cost savings. The press falls in the MACRS five-year class (Table 1), and it will have a salvage value at the end of the project of RM162,000. The press also requires an initial investment in spare parts inventory of RM19,000, along with an additional RM2,000 in inventory for each succeeding year of the project. If the tax rate is 35 percent and the discount rate is 12 percent, should the company buy and install the machine press? Why or why not?Table 1: Modified ACRS depreciation allowances
QUESTION 2
a) Explain the concept of incremental cash flow analysis and its purpose.
b) Explain the difference between a sunk cost and an opportunity cost and give an example of each.
QUESTION 3
Chong Motors just issued 225,000 zero coupon bonds. These bonds mature in 20 years, have a par value of RM1, 000, and have a yield to maturity of 7.45 percent. What is the approximate total amount of money the company raised from issuing these bonds? (Assume semi-annual compounding)
The following are the historic returns for Chelle Computer Corporation. Determine the correlation coefficient between Chelle Computer and General Index and also calculate the standard deviation.
Suppose that Nike Corporation is expanding globally. One way to increase globally is to purchase shares of other firms, while other way is to open up new branches.
Financial ratios by themselves provide very little data about a company. We need to compare ratios across company's in similar industry sectors. The two methods for analyzing financial ratios for a company are:
How the application of weighted average cost of capital (WACC) would be applied to each method and how companies assess the feasibility of a project according to these valuation methodologies
Suppose there is no firm specific risk and the risk premiums are 5.3%, 3.9%, and 4.2% ; use the data below to find:
XYZ Company issued common stock that had a required rate of return of 12 percent, the stocks beta is 1.75, next dividend is expected to be dollar 2.50 & the risk free rate of return is 5 percent.
Build a solar power plant in Belarus. The assignment is to make financial statements (income statement, balance sheet, statement of cash flows) for three years for this business. The first year by month, the second and third year by quarter.
If the company uses an 8 percent discount rate and what is the future value of these cash flows at the end of year 4?
Mark is looking at the predict of expected economic growth. He plans to invest 120,000 dollar in an investment whose return would depend on the economic conditions.
Evaluate what is the financial break-even level for the project and what is the accounting break-even level for the project?
Calculate the internal rate of return for project 4. Why is the result an error - What if you only had $12,000 in year 0, and the cost of borrowing additional money was prohibitively high?
You purchased a stock 3 months ago for $32.81 per share. The stock paid no dividends. The current share value is $37.53. Calculate the APR of your investment?
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