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Coiner Clothes is contemplating the replacement of one of its knitting machines with a newer, and more efficient one. The old machine has a book value of $600,000 and a remaining useful life of 5 years. The firm does not expect to realize any return from scrapping the old machine in 5 years, but it can sell it now to another firm in the industry for $265,000. The old machine is being depreciated by $120,000 per year, using the straight- line method. The new machine has a purchase price of $1,175,000, an estimated useful life MACRS class life of 5 years, and an estimated salvage value of $145,000. The applicable depreciation rates are 20%, 32%, 19%, 12%, 11%, and 6%. The new machines is expected to save on electric power usage, labor and repair costs, as well as to reduce the number of defective articles of clothing. In total, an annual savings of $255,000 will be realized if the new machine is installed. The company’s marginal tax rate is 35% and it has a wacc of 12%. Should the firm purchase the new machine? Clearly support your answer
What is r correlation coefficient? What useful information does it provide? What is Se or standard error of the estimate? What useful information does it provide? What is a t-statistic? What does it measure? Do we know what values are considered acce..
Venture Partners has evaluated an early-stage investment in a startup company (Startco). Startco needs $4 million in financing, and SPC has offered to provide the financing in exchange for a 40% interest in the company. What is SPC's post-money valua..
What is the present value of an ordinary annuity of $1,000 per year for 7 years discounted back to the present at 10 percent? What would be the present value if it were an annuity due? What is the future value of an ordinary annuity of $1,000 per yea..
As one of the individuals worried about our planet's future, you have invested in $10, 600 of CleanTech, a photovoltaics venture, bonds a month ago(the par value was $10, 600). Keeping this in mind, what is the value of bonds in your hand at the mome..
FarCry Industries, a maker of telecommunications equipment,
You have been assigned to implement a three-month hedge for a stock mutual fund portfolio that primarily invests in medium-sized companies. Should you be long or short in the Midcap 400 futures contracts? determine the appropriate number of contracts..
Suppose you sell a fixed asset for $110,000 when its book value is $130,000. If your company’s marginal tax rate is 35 percent, what will be the effect on cash flows of this sale (i.e., what will be the after-tax cash flow of this sale)?
Triton Company's copy department, which does almost all of the photocopying for the sales department and the administrative department, budgets the following costs for the year, based on the expected activity of copies: The costs are assigned to two ..
A friend owes you money. He offers to pay you $1,000 today, $1,000 a year from now and $1,000 exactly two years from now. If 10% is the prevailing rate you expect on your investments, what is the present value of this arrangement? He offers to pay yo..
Fitz is risk-averse and is content with a relatively low but safe return on his investments. Frieda is risk-tolerant and seeks a very high rate of return on her invested savings. Yet both shareholders will applaud allow-risk capital investment that o..
Reality Automotive Corp. (“RAC”) manufactures after-market parts for automobiles and trucks (seat belts, windshield wiper blades, floor mats, and truckbed mats). The company is evaluating the expansion of its manufacturing plant to enable it to take ..
TwitterMe, Inc., is a new company and currently has negative earnings. The company’s sales are $2,700,000 and there are 275,000 shares outstanding. If the benchmark price-sales ratio for the company is 5.3, how much will you pay for the stock? If the..
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