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Whoopie Cushions, Inc. is analyzing the proposed purchase of a new machine for $550,000. The proposed machine has an estimated economic life of six years but will be treated as five-year MACRS property for depreciation purposes. The machine will increase the firm's capacity, and it is expected to contribute $176,000 annually to earnings before depreciation, interest and taxes. The firm is in a 30% tax bracket and estimates its cost of capital to be 16%. Calculate the NPV of this investment using an Excel spreadsheet. Show and label your work. Formulas for NPV and IRR are pre programmed in Excel.
Last Year's Dividend (Do) $2.80. Growth rate for year 1 (g1) 25%. Current Estimated Value (Po) = If the stock was currently selling for $50, would you buy it yes or no?
Taylor Textbooks Inc. buys on terms of 1/13, net 58 days. It does not take discounts, and it typically pays on time, 58 days after the invoice date. Net purchases amount to $400,000 per year. On average, what is the dollar amount of costly trade cred..
Company expects to use $1,600,000 short term credit bus wants a $3, 000, 00 line of credit in case of unexpected events. LIBOR is 4% and the loan is priced at LIBOR plus 2.5% with Commitment fee of 0.3% on the unused portion of the line. Bank also re..
Assume large-company stocks returned 12.8 percent on average over the past 75 years. The risk premium on these stocks was 7.9 percent and the inflation rate was 3.6 percent. What was the average nominal risk-free rate of return for those 75 years?
What equal series of payments must be paid into a sinking fund in order to accumulate each given amount?
You are evaluating a growing perpetuity product from a large financial services firm. The product promises an initial payment of $24,000 at the end of this year and subsequent payments that will thereafter grow at a rate of 0.03 annually. If you use ..
Given the expectations for a decline in US interest rates and share prices, how were capital flows between the United States and other countries likely to be affected?
Esther egg farm is contructing its pro forma financial statements for this year. At year end, assest were 400,000 and accounts payable(the only curren liabilities account) were 125,000 last year sales were 500,000. esther expects to grow by 15% this ..
Bilbo Baggins wants to save money to meet three objectives. First, he would like to be able to retire 30 years from now with retirement income of $27,500 per month for 25 years, with the first payment received 30 years and 1 month from now. If he ca..
You are attempting to value a call option with an exercise price of $90 and one year to expiration. The underlying stock pays no dividends, its current price is $90, and you believe it has a 50% chance of increasing to $125 and a 50% chance of decrea..
You purchase a Eurobond, at a quoted price of 102%. The annual coupon is 6%, and we are exactly one month after the past coupon date. You buy 100,000 EUR nominal value of the bond. What is the total cash paid for this bond purchase?
Your firm wants to lease a $500,000 piece of equipment. The equipment has a 5-year life and a salvage value of $100,000 at the end of year 5.Depreciation is straight-line over 5 years to a zero book value. There will be 5 pre-paid lease payments on t..
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