At what level of pretax cost savings would be indifferent

Assignment Help Financial Econometrics
Reference no: EM13334400

Your firm is contemplating the purchase of a new $703,000 computer-based order entry system. The system will be depreciated straight-line to zero over its 5-year life. It will be worth $68,400 at the end of that time. You will be able to reduce working capital by $95,000 (this is a one-time reduction). The tax rate is 31 percent and your required return on the project is 19 percent and your pretax cost savings are $293,150 per year. what is the NPV of the project? What is the NPV if the pretax cost savings are $211,050 per year? At what level of pretax cost savings would you be indifferent between accepting the project and not accepting it?

Reference no: EM13334400

Questions Cloud

Improvement to make communication more effective : Collect samples of a series of incoming and outgoing letters of the organization selected. Analyze these letters to determine whether principles and techniques explained in the book of communication were observed or not
Find the absolute pressure at the bottom of the container : A container is filled to a depth of 19.0 cm with water. On top of the water floats a 32.0-cm-thick layer of oil with specific gravity0.600
How to recognize the use and misuse of information presented : One of the concepts you encountered in the readings this module was how to recognize the use and misuse of information presented in the form of percentages. In this discussion assignment, you will conduct an Internet search to find several exa..
Explain the partial pressure of oxygen in the mixture : A gaseous mixture of O2 and N2 contains 38.8% nitrogen by mass. What is the partial pressure of oxygen in the mixture if the total pressure is 365mmHg
At what level of pretax cost savings would be indifferent : Your firm is contemplating the purchase of a new $703,000 computer-based order entry system. The system will be depreciated straight-line to zero over its 5-year life. It will be worth $68,400 at the end of that time.
Design a complete algorithm or draw a flowchart : Design a complete algorithm or draw a flowchart that determines the sales tax on purchases under $1.00 for a state with a 7% sales tax rate. Display the sales tax amount if the number of cents entered was 99 or less; otherwise, display an error me..
What are the net cash flows in years 0-1-2 and 3 : The project requires an initial investment in net working capital of $294,000. The project is estimated to generate $2,352,000 in annual sales, with costs of $940,800.
What is the average pressure on that area in atm : Someone steps on your toe, exerting a force of 300 N on an area of 1.1 cm2. What is the average pressure on that area in atm
Underlying statistical distribution for a p-chart : The underlying statistical distribution for a p-chart (yes-no attribute) is Binomial, but for large samples can be approximated by a Normal (bell-shaped) distribution. Why is this true?

Reviews

Write a Review

Financial Econometrics Questions & Answers

  A project report on banking system

The objective of this business report is to focus upon evaluating the current portfolio of Baituna home loans product of Bank Muscat and its volumes. It focus upon the current standing of the product in Oman and its performance on the basis of its vo..

  Determine how much faster could pay the loan off

All is not lost: You just received an offer in the mail to transfer your $12,000 balance from your current credit card, which charges an annual rate of 19.8 percent, to a new credit card charging a rate of 10.4 percent.

  How many shares of millers stock must sell to offset

Miller's has decided to add leverage to its financial operations by issuing $250,000 of debt at 8 percent interest. The debt will be used to repurchase shares of stock. You own 400 shares of Miller's stock.

  What would appear in year-end balance sheet for the contract

A construction company entered into a fixed-price contract to build an office building for $40 million. Construction costs incurred during the first year were $12 million and estimated costs to complete at the end of the year were $18 million.

  Define what would be the total return of the bond in dollars

A 6.5% coupon bond with 25 years left to maturity is priced to offer a 4.5% yield to maturity. You believe that in three years, the yield to maturity will be 12%. If this occurs, what would be the total return of the bond in dollars

  What is the bonds price if comparable debt yields 12 percent

A high-yield bond has the following terms: Principal amount $1,000 Annaul Interest Paid $100 Maturity 10 years (a) What is the bond's price if comparable debt yields 12 percent

  Calculate t if the force of interest is delta given

Using the method of equated time, a payment of 100 at time t = 1 plus a payment of X at time t = 10 is equivalent to a payment of 100 + X at time t = 4. The above two payments of 100 and X are equivalent to a payment of 100 + X at time t

  What is the net present value of project given a required

At the beginning of the project, inventory will decrease by $16,000, accounts receivables will increase by $21,000, and accounts payable will increase by $15,000. All net working capital will be recovered at the end of the project.

  Determine what apr rate should you charge your customers

As a jewelry store manager, you want to offer credit, with interest on outstanding balances paid monthly. To carry receivables, you must borrow funds from your bank at a nominal 6%, monthly compounding.

  What is the current share price at a rate of 20 percent

Dividends are expected to grow at a rate of 20 percent for the next three years, with the growth rate falling off to a constant 8 percent thereafter. If the required return is 11 percent and the company just paid a dividend of $1.45

  Organizational plan and business philosophy

Business decision, organizational plan, business philosophy, policy decision, or concept related to the class.

  How much value did management add to stockholders wealth

For 2012, Everyday Electronics reported $22.5 million of sales and $18 million of operating costs (including depreciation). The company has $15 million of investor-supplied operating capital.

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