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The Fleming Company, a food distributor, is considering replacing a filling line at its Oklahoma City warehouse. The existing line was purchased several years ago for $600,000. The line’s book value is $200,000, and Fleming management feels it could be sold at this time for $150,000. A new, increased capacity line can be purchased for $1,200,000. Delivery and installation of the new line are expected to cost an additional $100,000. Assuming Fleming’s marginal tax rate is 40%, calculate the net investment for the new line.
Rena purchased 200 shares of a no-load stock mutual fund.- What are the tax consequences of Rena's ownership of this stock fund? Rena is in a 35% marginal tax bracket.
Plethora Corporation's stock is selling for $29.45 in the market. The stick's required rate of return is 15.27%. The previous dividend was $3 (i.e. D0=$3) and dividends are expected to grow at a constant rate. What is the growth rate for this stock?
Investment X offers to pay you $6,100 per year for 9 years, whereas Investment Y offers to pay you $8,700 per year for 5 years. If the discount rate is 5 percent, what is the present value of these cash flows?
The company also estimates that an additional investment in inventory of $3 million is required because of the anticipated sales increase. Determine the net effect of this plan on the pretax profits of Bimbo.
Pandecker, Inc., estimates the variable costs of producing one unit to be $11.26. The company plans to produce 26,500 units. The fixed costs the company expects to incur are $82,770. What is Pandecker's break-even selling price?
Organic Produce Corporation has 8.6 million shares of common stock outstanding, 610,000 shares of 7.1 percent preferred stock outstanding, and 186,000 of 8.3 percent semiannual bonds outstanding, par value $1,000 each. If the firm is evaluating a new..
Assume that a firm buys a depreciable asset for $6 million and its salvage value is $0 after a depreciable life of 12 years. Using the SLN and DDB functions, determine the depreciation expense for each of the 12 years under the straight-line (SLN) an..
Asset K has an expected return of 20 percent and a standard deviation of 35 percent. Asset L has an expected return of 8 percent and a standard deviation of 19 percent. The correlation between the assets is .44. What are the expected return and st..
Assume that a $1,000,000 par value. semiannual coupon U.S. Treasury note with two years to maturity (YTM) has a coupon rate of 3%. The yeild to maturity of the bond is 9.90%. Using this information and ignoring the other cosr involved, calculate the ..
Eisenhower Communications is trying to estimate the first-year net operating cash flow (at Year 1) for a proposed project. The financial staff has collected the following information on the project: Sales revenues $15 million Operating costs (excludi..
Investors require a 4 percent return on risk-free investments. On a particular risky investment, investors require an excess return of 7 percent in addition to the risk-free rate of 4 percent. What is this excess return called? Required return Inflat..
ou own a bond portfolio and expect the market interest rate to increase for the foreseeable future. (a) What should you do with regards to the Duration of the portfolio and your own investment horizon? (b) What are the two reasons for doing so?
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