Use straight-line depreciation to zero over project life

Assignment Help Financial Management
Reference no: EM131043468

You are evaluating two different silicon wafer milling machines. The Techron I costs $243,000, has a three-year life, and has pretax operating costs of $64,000 per year. The Techron II costs $425,000, has a five-year life, and has pretax operating costs of $37,000 per year. For both milling machines, use straight-line depreciation to zero over the project’s life and assume a salvage value of $41,000. If your tax rate is 35 percent and your discount rate is 9 percent, compute the EAC for both machines.

Reference no: EM131043468

Questions Cloud

Corporate bond-what will be change in the price of bond : A corporate bond with a face value of $1000 and a coupon rate of 5% has only 4 years remaining to maturity. Because of its credit rating, this bond has a yield of 6.5%. The rating agencies just upgraded the bond, and as a result its discount rate fel..
Distribution of assets-liabilities within maturity buckets : The repricing model ignores information regarding the distribution of assets and liabilities within maturity buckets. This limitation of the model refers to; a. market value effect b. overaggregation c. runoffs and pre-payments d. OBS activities
What must the coupon rate be on the bonds : Essary Enterprises has bonds on the market making annual payments, with nine years to maturity, a par value of $1,000, and selling for $966. At this price, the bonds yield 6.8 percent. What must the coupon rate be on the bonds?
Undiscounted cash flows to investorover life of security : In a pool with 200 mortgages (10 year FRM, annual payments), average starting balance of $250,000 each, 6% mortgage rate, 0.5% servicing fee. If the CPR for the is pool is 5%, what is the sum of the undiscounted cash flows to the investorover the lif..
Use straight-line depreciation to zero over project life : You are evaluating two different silicon wafer milling machines. The Techron I costs $243,000, has a three-year life, and has pretax operating costs of $64,000 per year. The Techron II costs $425,000, has a five-year life, and has pretax operating co..
What is the minimum expected annual return for stock : In order to fund her retirement, Michele requires a portfolio with an expected return of 0.11 per year over the next 30 years. She has decided to invest in Stocks 1, 2, and 3, with 25 percent in Stock 1, 50 percent in Stock 2, and 25 percent in Stock..
What is the total annual return for this bond : Suppose that an investor is planning to purchase a 9% semi-annual coupon bond selling at par with 10 years to maturity and plans to hold it for 4 years and sell it at an expected yield to maturity of 8.5%. The investor expects that he can reinvest th..
what happens to the NAV of growth mutual fund : Explain what happens to the NAV of a growth mutual fund (with 1 million share: outstanding) in the future if it now buys 100,000 Google July 720 calls for a premium of 18 if Google's stock price rises in the future to $755 by July 2016

Reviews

Write a Review

 

Financial Management Questions & Answers

  Explain the firm''s cash flow due to financing activities

At the end of the year, Tum Biscuit Co. had $160 million in cash on its balance sheet, and the firm had $305 million in cash at the end of the second year. What was the firm's cash flow (CF) due to financing activities in the second year?

  Explain about derivatives

Explain about derivatives. Derivative is a product whose value is derived from the value of one ormorebasic variables,Explain Products, participants and functions.

  Cost of new outside equity capital

The cost of retained earnings is less than the cost of new outside equity capital. Consequently, it is totally irrational for a firm to sell a new issue of stock and to pay cash dividends during the same year. Discuss the meaning of those statements.

  Financial management from books of aggarwal bors following

from books of aggarwal bors following information has been extracted rs. sales 240000 variable costs 144000 fixed costs

  Equity and debt beta-return on assets and asset beta

ChemCo has an 8% debt cost of capital and a 15% equity cost of capital. CemCo’s debt has a market value of $500 million in perpetual bonds with a promised yield of 10%. Currently there are 10 million shares outstanding, each valued at $50. The risk-f..

  Weighted average cost of the three loans

You have just earned your MBA and have three student loan balances outstanding. They all mature in 5 years. The Amounts owed and the associated interest rates are shown in the table below. You can also combine these loans ($64,000) into a consolidate..

  What is the companys debt-equity ratio

Fama’s Llamas has a weighted average cost of capital of 9.3 percent. The company’s cost of equity is 13 percent, and its pretax cost of debt is 7.3 percent. The tax rate is 40 percent. What is the company's debt-equity ratio?

  Joint-cost allocation method that recognizes the revenues

The joint-cost allocation method that recognizes the revenues at split-off but does not consider any further processing costs is the:

  What annual savings can aqua system expect

Aqua System Inc. expects to have $18,526,400 in credit sales during the coming year. Currently all checks are sent to the home office. A proposed lockbox system can eliminate 1 days of float, releasing funds which, when invested, will earn 12.10 perc..

  Merck wants to develop a promising new

Merck wants to develop a promising new NCE [New Chemical Entity] costing $800  million  to $1 billion to bring through clinical trials to market. How would it expect to finance this project? What would the impact be on its D/E?

  Transactional and transformational styles of leadership

Which is true about the transactional and transformational styles of leadership?

  Considering the purchase of new manufacturing facility

Sanders Enterprises, Inc., has been considering the purchase of a new manufacturing facility for $288,000. The facility is to be fully depreciated on a straight-line basis over seven years. It is expected to have no resale value after the seven years..

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