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Lang Industrial Systems Company (LISC) is trying to decide between two different conveyor belt systems. System A costs $264,000, has a four-year life, and requires $81,000 in pretax annual operating costs. System B costs $372,000, has a six-year life, and requires $75,000 in pretax annual operating costs. Suppose LISC always needs a conveyor belt system; when one wears out, it must be replaced. Assume the tax rate is 34 percent and the discount rate is 8 percent.
Calculate the EAC for both conveyor belt systems.
Which one is false about calculating expected portfilio returns and variances?
The market price of a share of common stock at the time of issuance was $19.50, while the market price of a preferred share of stock at the time of issuance was $32. The company paid $12.50 for its treasury stock. Fill in the missing stockholders' eq..
Dublin Medical (DM), a large established corporation with no growth in its real earnings, is considering acquiring 100% of the shares of Arlington Corporation, a young firm with a high growth rate of earnings. What is the expected gain from acquisiti..
The firm is considering selling bonds and simultaneously repurchasing some of its stock. If it moves to a capital structure with 40% debt based on market values, its cost of equity, rs, will increase to 11% to reflect the increased risk. What would b..
Lowe Technology Corp is evaluating the introduction of a new product. The possible levels of unit sales and probabilities of their occurrence are given. Compute the Standard Deviation
Simtek currently pays a $2.50 dividend (D0) per share. Next year’s dividend is expected to be $3 per share. After next year, dividends are expected to increase at a 9 percent annual rate for 3 years and a 6 percent annual rate thereafter. What is the..
A series of ten $500 payments are received at the end of each year over a 10-year period. During the first two years the interest rate was 5% annual compounded monthly. During the following two years (years 3-4) the interest rate was 6% annual compou..
Quad Enterprises 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.
Incorporating Country Risk in Capital Budgeting. How could a country risk assessment be used to adjust a project’s required rate of return? How could such an assessment be used instead to adjust a project’s estimated cash flows?
You are an agent who wishes to sell a $1 million life insurance policy. Your client thinks she can’t afford a policy that large, so to reduce the price you tell her you will give her 50 percent of your commission. Is this legal or ethical? To increas..
How are networking capital, risk, and profitability are related? Explain. What is the relationship between key components of cash conversion cycle? What are the strategies to minimize the CCC and why is it important?
Broussard Skateboard's sales are expected to increase by 15% from $8 million in 2013 to $9.2 million in 2014. Its assets totaled $2 million at the end of 2013. Broussard is already at full capacity, so its assets must grow at the same rate as project..
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