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Ace Software, Inc. is contemplating replacing some existing equipment with some new hardware. The existing equipment, carried on the books at $800, is being depreciated using the straight-line method to a salvage value of $80 over its remaining life of 8 years. Ace could scrap the equipment today for $900.
The new machinery would also be depreciated using the straight-line method to a salvage value of 20% of its purchase price over an expected life of 8 years. The new equipment would be expected to lower annual operating expenses by $750. The new machinery would require additional net-working-capital of $160. Ace has a required return of 12% and a marginal tax rate of 40%.
Find the maximum amount that the firm would be willing to pay for the new equipment if replacement is to be worthwhile. ?
The Nutrex Corporation wants to calculate its weighted average cost of capital. Its target capital structure weights are 40 percent long-term debt and 60 percent common equity. The before-tax cost of debt is estimated to be 10 percent and the company..
You have just purchased an investment that generates the following cash flows for the next four years. You are able to reinvest these cash flows at 8.08 percent, compounded annually. How much is this investment worth today? What is the present value ..
Assume that the 3-month futures contract on SPX settled at 2070, r = 0.25%, q = 2.25%, arbitrage transactions costs (TC) involving these futures contract are 1.16 (index points). The TC band is [2060.84, 2058.52]. Therefore, the index (SPX) must have..
Pricing and Production Decisions at PoolVac, Inc.
Calculate the monthly payment required on a mortgage with the following characteristics: (a) Loan Value: $325,000, (b) Interest Rate: 4.25%, and (c) Years: 30.
Suppose the spot price of gold is $1200 per ounce. The futures price for delivery in six months is $1208, while the futures price for delivery in one year is $1214. The interest rate on 6-month loans is 1.00percent (on an annual basis). What is the i..
You are to write a 3-5 page summary to me as VP for Production, stating your observations of XYZ Manufacturing. In this memo, you will include: Make-Buy decisions on widgets and support your decision with made-up numbers.
Stephen plans to purchase a car 7 years from now. The car will cost $67,989 at that time. Assume that Stephen can earn 7.37 percent (compounded monthly) on his money. How much should he set aside today for the purchase?
Kendra Enterprises has never paid a dividend. Free cash flow is projected to be $80,000 and $100.000 for the next 2 years, respectively; after the second year, FCF is expected to grow at a constant rate of 8%. The company’s weighted average cost of c..
Suppose inflation is expected to increase the cost of producing gold by 10% a year but the price of gold does not change because of large sales of stockpiled gold by foreign governments.
what is an ipo? how does an ipo allow an organization to grow financially? when is a merger or an acquisition instead
Define and discuss the determinants of growth. What is the basic idea of the percentage of sales approach?
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