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Your firm is contemplating the purchase of a new $600,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worth $64,000 at the end of that time. You will be able to reduce working capital by $79,000 (this is a one-time reduction). The tax rate is 30 percent and the required return on the project is 16 percent.
If the pretax cost savings are $204,000 per year, what is the NPV of this project?
If the pretax cost savings are $154,000 per year, what is the NPV of this project?
At what level of pretax cost savings would you be indifferent between accepting the project and not accepting it?
You run a $100M stock portfolio that has a beta of 1.50. The S&P 500 Index is currently at 1,600 and you expect the general market to be very volatile over the next six months. You are expecting to capture an alpha of 0.5% every month. The risk free ..
A U.S.-based MNC imports 30 percent of its supplies from Europe. Exports to Europe, which are invoiced in Euros, account for approximately 50 percent of its revenues. Explain how the MNC can reduce its economic exposure to exchange and interest rates..
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ABC Tec Inc. is expected to produce $100 million FCF (free cash flow) at the end of year 3, $150 million FCF at the end of year 4, $180 million at the end of year 5 and thereafter the FCF is expected to grow at a constant rate of 4%. No FCFs ($0) are..
Conagra just announced an earnings increase of 2%, but the price of the stock dropped substantially after the announcement. Is there a rational explanation for this result?
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bonds and term structure1. graph the bond yield to maturity ytm on the y-axis of an xy-scatter plot with the bond to
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..
USE DECIMALS The Taylors have purchased a $190,000 house. They made an initial down payment of $30,000 and secured a mortgage with interest charged at the rate of 8%/year on the unpaid balance. Interest computations are made at the end of each month...
What is the present value of the following set of cash flows at an interest rate of 6%; $100 now, $600 three years from now, $500 five years from now, and $300 ten years from now.
Niko has purchased a brand new machine to produce its High Flight line of shoes. The machine has an economic life of four years. The depreciation schedule for the machine is straight-line with no salvage value.
Surplus and Deficit Units Explain the meaning of surplus units and deficit units. Provide an example of each. Which types of financial institutions do you deal with? Explain whether you are acting as a surplus unit or a deficit unit in your relations..
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