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1. Your firm is contemplating the purchase of a new $720,000 million computer-based order entry system. The PVCCATS is $260,000, and the machine will be worth $280,000 at the end of the five-year life of the system. You will save $350,000 before taxes per year in order processing costs and you will be able to reduce working capital by $110,000 (this is a one-time reduction). If the tax rate is 35 percent, what is the IRR for this project?
2. In the previous problem, suppose your required return on the project is 20 percent, your pre-tax cost savings are now $300,000 per year, and the machine can be depreciated at 30 percent (Class 10). Will you accept the project?
What if the pre-tax savings are only $240,000 per year? At what level of pre-tax cost savings would you be indifferent between accepting the project and not accepting it?
Dew Drop In, Inc. announces is quarterly dividend will increase from $3.80 to $4.00. After the announcement, the price of Dew Drop In, Inc.'s stock drops.
Using graphs, examine the predictability of the standard deviation of each currency and the predictability of the correlation between the two currencies.
1. puckett products is planning for 5 million in capital expenditures next year. pucketts target capital structure
You wrote a piece of software that does a better job of allowing computers to network than any other program designed for this purpose. A large networking company wants to incorporate your software into their systems and is offering to pay you $500,0..
If a corporation begins to suffer large losses, then the default risk on the corporate bond will increase. Illustrate graphically how this event affects the demand or supply what happens to equilibrium price and interest rate of the bond according.
Cypress Corporation has regular taxable income of $170,000 (assume annual gross receipts are greater than $5 million) and a regular tax liability of $49,550 for 2014. The corporation also has tax preference items amounting to $105,000. Calculate Cypr..
Calculate the bond equivalent yield and effective annual return on a jumbo CD that is 115 days from maturity and has a quoted nominal yield of 6.62 percent.
You need a 30-year fixed rate mortgage to buy a new home for $290,000. Your mortgage bank will lend you the money at a 5.85 percent APR for this 360-month loan. However, you can afford monthly payments of only $1,300, so you offer to pay off any rema..
The optimal capital structure simultaneously maximizes stock price and minimizes the WACC. The optimal capital structure minimizes the cost of equity, which is a necessary condition for maximizing the stock price. The optimal capital structure simult..
The common stock of Winsson, Inc. is currently priced at $52.50 a share. One year from now, the stock price is expected to be either $54 or $60 a share. The risk-free rate of return is 4%. What is the value of one call option on Winsson stock with an..
Conundrum Mining is expected to generate $12 million, $18 million, $22 million and $26 million in free cash flows over the next four years, after which they are expected to grow at a rate of 5% per year. If the weighted average cost of capital is 12%..
A construction company is considering an expansion project. So far, they have spent $75,000 investigating the viability of the project and have decided to proceed. The proposed project will cost approximately $450,000 in addition to the $75,000 that ..
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