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You must evaluate a proposal to buy a machine. The cost of the machine including shipping, modification and installation costs is 100,000. The machine will be depreciated using MACRS 3 year class life 33%, 45%,,15%7%) sold after 3 years for 12,000. The firm has 10 years bonds outstanding selling for 1200. The coupon rate on the bond is 12% and par value is $10000. The beta of the firm's common stock is 1.5. Risk free rate is 7%.
What is the tax shield?
What are the cash flows for Yr 1-3?
Keiper, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2.85 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be wort..
A company purchases equipment for $5 million, incurs shipping costs of $30, 000 and installation costs of $50,000. It also requires additional net working capital of $100,000. What is the depreciable base?
What is the required return for Dentrix Corporation? The risk-free rate is 2.7%, the risk premium is 7.7, the expected rate of inflation is 3.4% and the company can currently issue bonds at a YTM of 4.9%. The company's beta is estimated to be 0.9.
Which of the following is NOT accurate regarding evaluating NPV estimates and break-even analysis?
If Harpo is able to raise the $300,000 it needs by stretching its accounts payable, determine the annual financing cost of this source of financing. For this problem, assume that a year con- sists of twelve 30-day months.
Give examples of how ratios gleaned from the financial statements can be used as a tool in helping a firm plan for the future. What do these ratios tell an individual analyzing them? What limitations prevent the forecasts from being foolproof?
Bill Farmer has had some financial problems and cannot pay the $200,000 loan that is due next week (i.e. now). Bill's lender agrees to accept 5 annual payments of $46,000 each for the next 5 years instead, with the first payment due one year from now..
Suppose Whole Foods’ projected free cash flow for next year is FCF = $8.75 billion, and due to expected lower revenues and slower growth sales FCF is expected to grow at a constant rate of only 4.5% into the infinite future. The company’s weighted av..
Taking for Value Betty Ellis and her then husband W.G. Ellis executed and delivered to the Standard Finance Company (Standard) a promissory note in the amount of $2,800. After receiving the note, Standard issued a check to the couple for $2,800. The ..
Alaska Power Company issued $1,000 bonds that have an annual coupon rate of 6.5%. The present market value of the bonds is $1,225. If the bonds have 17 years remaining until maturity, what is the current yield on Alaska Power Company bonds?
We are evaluating a project that costs $1,100,000, has a ten-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 42,000 units per year. Calculate the best-case an..
Photo light Corporation (PC) manufactures time series photographic equipment. It is currently at its target debt/equity ratio of 0.60. It's considering building a new manufacturing facility. The facility costs $40 million now to build. This new plant..
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