Interest rate properly reflects the time value of money

Assignment Help Financial Management
Reference no: EM131318825

A new machine with an expected useful life of 4 years is expected to generate annual net cash flows of $15,000. What are the (rounded) cash flows worth today if a 3% interest rate properly reflects the time value of money in this situation?

Reference no: EM131318825

Questions Cloud

Assistance in marketing the home and negotiation strategy : Discuss the issues raised in the following hypothetical situations based on information learned in the textbook. A real estate licensee must treat customers fairly. Clients are entitled to all this information and the licensee's opinion regarding mar..
What is the project year one net cash flow : Keiper, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2.43 million. The fixed asset falls into the three-year MACRS class. The project is estimated to generate $1,990,000 in annual sales, ..
Indifferent between accepting project and not accepting it : Your firm is contemplating the purchase of a new $600,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worth $64,000 at the end of that time. At what level of pretax cost ..
Explain in both a quantitative and qualitative way : You purchased $100 of gold on February 2, 2015 and $100 of Microsoft stock.  As of today, which one is the better investment?  Give specific information to justify your answer.  Explain – in both a quantitative and qualitative way – what has happened..
Interest rate properly reflects the time value of money : A new machine with an expected useful life of 4 years is expected to generate annual net cash flows of $15,000. What are the (rounded) cash flows worth today if a 3% interest rate properly reflects the time value of money in this situation?
Evaluating two different silicon wafer milling machines : You are evaluating two different silicon wafer milling machines. The Techron I costs $261,000, has a three-year life, and has pretax operating costs of $70,000 per year. The Techron II costs $455,000, has a five-year life, and has pretax operating co..
Calculate eac for both conveyor belt systems : Lang Industrial Systems Company (LISC) is trying to decide between two different conveyor belt systems. System A costs $264,000, has a four-year life, and requires $81,000 in pretax annual operating costs. Calculate the EAC for both conveyor belt sys..
Postal service for the next five years : Consider a project to supply 105 million postage stamps per year to the U.S. Postal Service for the next five years. You have an idle parcel of land available that cost $1,950,000 five years ago; if the land were sold today, it would net you $2,150,0..
Payment using actual and constant dollar analysis : A company of $20,000 is to be received 10 years hence, followed by a $40,000 payment 17 years from the present. If over this time span the annual inflation rate is 5% while the expected annual market rate is 9%, calculate the present equivalent these..

Reviews

Write a Review

Financial Management Questions & Answers

  About the sells equipment

During the current year, Hugo sells equipment for $150,000. The equipment cost $175,000 when placed in service two years ago, and $55,000 of depreciation deductions were allowed. The results of the sale are (how much gain and what rate is it taxed at..

  Prepare comments in a clear and concise memorandum

Chris Vericker has recently been approached by his brother-in-law, Edward Peabody, with a proposal to buy a 15% interest in Peabody Swimwear. Please prepare your written comments in a clear and concise memorandum to Mr. Vericker

  Variable growth a fast-growing firm recently paid

VARIABLE GROWTH A fast-growing firm recently paid a dividend of $0.35 per share. The dividend is expected to increase at a 20 percent rate for the next three years. Afterwards, a more stable 12 percent growth rate can be assumed. If a 13 percent disc..

  Merger tactics are designed to thwart takeovers and mergers

Defensive merger tactics are designed to thwart takeovers and mergers. Briefly describe a few examples of such tactics. Do such activities work to the advantage of shareholders all of the time? Who do you think benefits the most from these activities..

  Modigliani and miller dividend policy

Some have argued that, if the firm issues an even higher dividend than expected, it must mean they do not have many profitable, new projects to invest in. Thus the stock price should fall. How would you respond and why?

  What is an interest tax shield

Briefly explain the role of financial leverage in affecting returns on equity ? What is an interest tax shield, and how does this affect the value of a company?

  Dividend is expected to grow by the same amount

North Carolina Haymakers Inc. ("NCHI") has just paid a dividend of $1.65 per share. Sales and profits for Pale Hose are expected to grow at a rate of 3% per year. Its dividend is expected to grow by the same amount. If the required return is 14%, wha..

  Not-for-profit managed care plan

Consider the following financial statements for BestCare HMO, a not-for-profit managed care plan: BestCare HMO Statement of Operations and Change in Net Assets Year Ended June 30, 2012 (in thousands) what is the economic rationale behind its reported..

  The current market rate of interest on the bright sun bonds

Bright Sun, Inc. sold an issue of 30-year $1,000 par value bonds to the public. The bonds had a 12.68 percent coupon rate and paid interest annually. It is now 14 years later. The current market rate of interest on the Bright Sun bonds is 11.60 perce..

  Calculate income taxes and average tax rate

Oakdale Fashions, Inc., had $400,000 in 2015 taxable income. Use the tax schedule in Table 2.3 to calculate the company’s 2015 income taxes. Calculate: Income taxes, Average tax rate, What is the marginal tax rate?

  Planning to issue some bonds

XYZ Company is planning to issue some bonds. The bonds, with a $5,000 par value and the coupon rate of 12% will mature in 10 years. The interest will be paid semi annually. Suppose two years later from the original issuing date, the going rate in the..

  Purchased a zero coupon bond one year

You purchased a zero coupon bond one year ago for $173.85. The market interest rate is now 9 percent. If the bond had 20 years to maturity when you originally purchased it, what was your total return for the past year? Assume semiannual compounding. ..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd