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Dave Co. owns aging machines and is considering buying new ones. Dave Co. is considering replacing their older machines to take advantage of the higher potential day rates for their contracts over the next five years. Dave Co. current produces annual revenues of $35 M per machine with cash costs of $16 M per machine. The older machines also currently have $5 M tied up in NWC per machine. The controller of the company has estimated annual revenues for new build machines at $269 M per machine with cash costs of $30 M per machine. The new machines would require $15 M in NWC each. The purchase price of a new machine is $750 M. They expect to depreciate this on a straight-line basis to zero over the next five years. However, the company estimates that a new machine could be sold for $400 M at the end of the project. If they purchased a new machine today, they could sell an old one on the open market for $30 M. The old machines are currently carried on the books at $35 M each and are being depreciated on a straight-line basis by $5 M per year. If they decided to stick with the old machines, they expect them to have a market value of only $15 M in five years. Assume that Dave Co. faces a 40% corporate tax rate and an 17% cost of capital. What is the NPV of the decision (in $M per machines) to replace the old machines with the new ones?
The Bovespa (Brazilian Equity Index) is at 15,000. The dividends on the Index last year were 5% of the Index value. Analysts expect them to grow at 15% a year in real terms for next 5 years. After the 5th year, the growth is expected to drop to 5% in..
You purchase a Eurobond, at a quoted price of 102%. The annual coupon is 6%, and we are exactly one month after the past coupon date. You buy 100,000 EUR nominal value of the bond. What is the total cash paid for this bond purchase?
If a nurse deposits $1,000 today in a bank account and the interest is compounded annually for 12 percent, what will be the value of this investment: Five years from now
A furniture manufacturer produces both large desks and small desks (in whole numbers). Each type of desk is made entirely out of pine or entirely out of cherry. A total of 1000 board feet of pine and 1100 board feet of cherry are available for produc..
For month ended 6/30/X1, there were 1,531 of direct labor hours incurred - Explain how would I begin creating a variable costing income statement and absorption statement?
As a jewelry store manager, you want to offer credit sales to your customers, with interest on outstanding balances paid monthly. However, to finance your working capital, you must borrow funds from your bank at a nominal 6%, monthly compounding.
Distinguish between a variable cost, a fixed cost, and a mixed cost. Identify a publicly traded, well-known company, and identify what you envision would be a variable cost, a fixed cost, and a mixed cost for this company.
A 10-year annuity pays $2,150 per month, and payments are made at the end of each month. If the interest rate is 12 percent compounded monthly for the first five years, and 8 percent compounded monthly thereafter, what is the present value of the ann..
you are planning to purchase 100 shares of preferred stock and must choose between stock a and stock b. stock a pays an
How many years will it take to payback an investment of $100,000 given annual end-of-year cash flows of: $25,000, $30,000, $35,000, $40,000, $55,000? (Use nominal dollars rather than discounted dollars in the payback calculation.)
You work for a nuclear research laboratory that is contemplating leasing a diagnostic scanner (leasing is a very common practice with expensive, high-tech equipment). The scanner costs $5,700,000 and it would be depreciated straight-line to zero over..
Therefore, discuss the various types of healthcare financing options for the for-profit and not-for-profit healthcare organizations. Next, add-in the advantages/disadvantages for each, but first from the investor's perspective, and then from the issu..
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