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Locus Quintatus, Inc., a highly profitable maker of customized chariots, is planning to introduce a new model shortly. The firm must purchase equipment immediately at a cost of $900,000. Freight and installation costs for this equipment will be $100,000. The equipment will be depreciated as a 7-year class asset under MACRS. During the first year, Locus will have incremental operating expenses of $300,000 that are attributable to this project. Locus expects to be able to sell 1,000 chariots during year 2 at an average price of $800 each and to incur operating expenses of $300,000. Also, Locus expects its net working capital investment will increase by $50,000 during year 2. (Assume all operating costs and revenues are incurred at the end of each year.) The marginal tax rate for Locus is 40 percent. (Hint: See Appendix 9A for information on MACRS depreciation.) What is the required net investment, and what are the year 1 and year 2 net cash flows?
Movie Enron Scandle movie- What do you understand from this movie and write down what is in the movie?
acme corp. new product development team. the team is comprised entirely of design engineers and is meeting in the
Suppose the 180-day S&P 500 futures price is 1,537.77, while the cash price is 1,525.14. What is the implied difference between the risk-free interest rate and the dividend yield on the S&P 500?
The book value of equity of a firm is $82 million and the market value of equity is $96 million. The face value of debt of the firm is $40 million and the market value of debt is $16 million. What is the market value of assets of the firm?
You have just won the lottery and have the option of receiving $1,000,000 payments at the beginning of each year for the next 20 years or a lump sum payment today. If the interest rate is 5%, what is the value of the lump sum payment?
Refining the target valuation based on new information uncovered during due diligence is most likely to affect which of the following:
While vacationing in Florida, John Kelley saw the vacation home of his dreams. It was listed with a sale price of $200,000. The only catch is that John is 40 years old and plans to continue working until he is 65. Still, he believes that prices gener..
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Filer Manufacturing has 8.4 million shares of common stock outstanding. The current share price is $54, and the book value per share is $5. Filer manufacturing also has two bond issues outstanding. Assume that the overall cost of debt is the weighted..
Discuss differences between cash flow and accounting income and why it is important to use cash flow in making capital budgeting decisions. How do companies generate ideas for capital projects? Give some examples of capital projects that companies in..
Vandelay Industries is evaluating a project that costs $1,350,000 and has a 20 year life. Depreciation will be straight-line to zero over the life of the project. Management believes they will be able to sell the equipment at the end of the project f..
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