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Meals on Wings Inc., which supplies prepared meals for corporate aircraft, needs to purchase new broilers. The new broilers would replace broilers purchased 10 years ago for $105,000, which are being depreciated on a straight-line basis to a zero salvage value (15-year depreciable life). The old broilers can be sold today for $63,000. The new broilers will cost $202,000, installed (not counting funds already spent), and will be depreciated using straight-line depreciation over their 5-year life. They will be sold at their book value at the end of the 5th year. The firm expects to increase its revenues by $27,000 per year if the new broilers are purchased, but cash expenses will also increase by $3,000 per year. Annual interest expense will be $2,000, and net working capital will increase by $5,000. The new broilers will occupy space currently leased to another firm for $530 per month, and $5,000 has already been spent preparing the building for new broilers. The firm's tax rate is 40%. What is the cash flow from the replacement project for Year 1? Round your answers to the nearest dollar. $27,760 $27,442 $23,944 $22,744 $17,640
On January 1, 2009, your brother's business obtained a 30-year amortized mortgage loan for $250,000 at a nominal annual rate of 7.0%, with 360 end-of-month payments. The firm can deduct the interest paid for tax purposes. What will the interest ta..
Computation of NPV of an investment and What is the net present value of this investment and should you do it
The Gamma Systems Manufacturing Corporation has reached its maturity stage and its net sales are expected to grow at a 6 percent compound rate for the foreseeable future. Management believes that as a mature venture the appropriate equity discount r..
Suppose security C has a payoff of $600 when the economy is weak and $1800 when the economy is strong. The risk-free interest rate is 4%
Using both the supply and demand for bonds and liquidity preference framework, show how interest rates are affected when the riskiness of bonds rises. Are the results the same in the two frame works?
how large should the endowment of a college be in order to guarantee the availability of funds for 1000000 per year?
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a manager buys three shares of stock today and then sells one of those shares each year for the next 3 years. his
Compute the net present value of a project and the depreciation tax benefit from the retooling is reflected in the net cash flows in the table
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Explain how an economist could use the slope of the yield curve to analyze the probability that a recession will occur and why the spread may matter.
Enron employees were heavily invested in Enron stock through their 401(k) plans. While firms frequently provide a match in the form of firm stock, employees are typically free to move the money to an optional investment.
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