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Option 1: Annual machine maintenance expense is $15,000, expected salvage value is $150,000 after a lifetime of 15 years.
Option 2: Annual machine expense is $7000. There is an extra cost of $50,000 at the end of year 7 (over and above the regular maintenance cost for year 7). The total expected life for this machine is 9 years. Expected salvage value is $100,000.
Compare the value of the maintenance costs minus the salvage cost using each maintenance management option, assuming a discount rate of 4%. Provide your answer as a decimal ratio of the net costs associated with option1 to those of option 2 (C1/C2)
Southern California Publishing Company is trying to decide whether to revise its popular textbook, Financial Psychoanalysis Made Simple. The company has estimated that the revision will cost $85,000. If the company requires a return of 10 percent for..
You have a contract that entitles you to receive $1 million 20 years from now. But can't wait and want your money now. You want to sell your contract. What is a fair price for it? Assume the risk free, inflation adjusted interest rate is 3% per year,..
A company's debt is given by a bond that will mature in two years. After two years the company will terminate all activity. The company unlevered equity value in two years can be $17 millions with a 50% probability or $14 millions with probability 50..
Dittmer Inc. has the following information. The firm’s semi-annual bonds mature in 20 years which were issued 5 years ago, have an 8.00% coupon, a par value of $1,000, and a market price of $1,050.00. The company’s tax rate is 40%. The risk-free rate..
Using the appropriate interest table, compute the present values of the periodic amounts, shown on page 344, due at the end of the designated periods.
Discuss capital rationing and soft rationing and what are some of the important points to remember while estimating the cash flows of a project?
Provide three reasons why the number of independent commercial banks might fall sharply over the next few years.
What types of decisions need to be made when healthcare companies are getting ready to make an investment and indicate the main kinds of information/data needed to evaluate this capital investment project?
Select three companies from any industry except retail drugstores. a. Compute their forward P/E ratios using last year’s average price [(high plus low)/2] and estimated earnings. b. Compute their growth rate of earnings over the last five years. c. L..
The cash flow of a firm, also referred to as cash flow from assets, must be equal to the cash flow to:
Keenan Co. is expected to maintain a constant 4.2 percent growth rate in its dividends indefinitely. If the company has a dividend yield of 6.0 percent, what is the required return on the company’s stock?
What does the term "INTEREST RATE INVERSION" refer to? For the past several years, the Federal Reserve System has forced short-term interest rates to nearly zero. Why has it not been able to do the same for long-term interest rates? Explain.
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