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Consider a new line of equipment that will cost $760,000 and will save a company $160,000 in operating expenses for the next ten years. It will not affect sales, but it will result in an increase in Net Working Capital of $60,000.
The new line will replace an old line of equipment that will last for about 5 more years before it could be recycled for $40,000. If sold today, the old equipment is worth $120,000. The old equipment was purchased five years ago for $450,000 and is being depreciated using the MACRS 7-year rates. The new equipment will also be depreciated using the 7-year rates. The company’s marginal tax rate is 35% and their cost of capital is 11%.
Calculate the NPV and IRR of this replacement project.
At other casinos, the dealer is required to take a hit on soft 17, but must stay on all other hands with a value of 17, 18, 19, 20, or 21. For this situation, determine the probability of the ending value of the dealer's hand.
Pappy’s Potato has come up with a new product, the Potato Pet (they are freeze-dried to last longer). Pappy’s paid $132,000 for a marketing survey to determine the viability of the product. It is felt that Potato Pet will generate sales of $587,000 p..
Formula of Interest expense EBIT divided by Interest expense but this does not seem correct -
Use the following financial statement(s) to answer the questions below: Balance sheet of XYZ - Canada Cash CD 1000000 Debt 5000000 AR 3000000 Equity 6000000 FA 5000000 Inventory 2000000 CD 11000000 CD 11000000 Dollar Translation on May 31 CD2=$1 Cash..
Both Berkley and Oakley are large public corporations with subsidiaries throughout the world. Berkley uses a centralized approach and makes most of the decisions for its subsidiaries. Oakley uses a decentralized approach and its subsidiaries make man..
An interest rate is 11.75% per annum expressed with continuous compounding. What is the equivalent rate with semiannual compounding? (margin of error: +/- 0.01%)
Patriot Corp. compensates executives with 10-year European call options which is granted at-the-money. If there is a signi?cant drop in the share price, the company’s board will reset the strike price of the options to equal the new share price. Then..
Find the present value PV of the annuity necessary to fund the withdrawal given. HINT [See Example 3.] (Assume end-of-period withdrawals and compounding at the same intervals as withdrawals.
Travel America Coaches currently sells 15,000 motor homes per year at $94,000 each, and 1,500 luxury motor coaches per year at $159,000 each. The company wants to introduce a low-range camper to fill out its product line; it hopes to sell 6,000 of th..
Community Hospital has annual net patient revenues of $150 million. At the present time, payments received by the hospital are not deposited for six days on average. The hospital is exploring a lockbox arrangement that promises to cut the six days to..
According to the CAPM, what is the market risk premium given an expected return on a security of 20.0%, a stock beta of 1.8, and a risk-free interest rate of 11%? A common stock pays an annual dividend per share of $2.20. The risk-free rate is 7% and..
As the value of the Gini coefficient approaches one, The Gini coefficient is measured by
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