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Beryl’s Iced Tea currently rents a bottling machine for $54,000 per year, including a maintenance expenses. It is considering purchasing a machine instead, and is comparing two options:
a. Purchase the machine it is currently renting for $160,000. This machine will require $20,000 per year in ongoing maintenance expenses.
b. Purchase a new, more advanced machine for $260,000. This machine will require $20,000 per year in ongoing maintenance expenses and will lower bottling costs by $11,000 per year. Also, $40,000 will be spent upfront in training the new operators of the machine. Suppose the appropriate discount rate is 8% per year and the machine is purchased today. Maintenance and bottling costs are paid at the end of each year, as is the rental of the machine. Assume also that the machines will be depreciated via the straight-line method over seven years and that they have a 10-year life with a negligible salvage value. The marginal corporate tax rate i 35%. Should Beryl’s Iced Tea continue to rent, purchase its current machine, or purchase the advanced machine?
Today, you are borrowing money from your local bank. The loan is to be repaid in one lump sum payment of $15,000 one year from now. How much money are you borrowing today if the APR is 10.6 percent?
A stock had returns of 10 percent, 21 percent, and 8 percent for the past 3 years. Based on these returns, what is the probability that this stock will earn at least 20.00 percent in any one given year? Provide detailed calculations of Excel function..
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Rodgers Industries Inc. has completed its fiscal year on December 31, 2014. The auditor, Josh McCoy, has approached the CFO, Aaron Mathews, regarding the year-end receivables and inventory levels of Rodgers Industries. The following conversation take..
A business professional needs to easily and accurately calculate trade and cash discounts, interest, and interest rates. The list price for a radio is 22% higher than its net price. If the net price is $29.00, what is the list price? What is the amou..
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During times of inflation, which of these inventory accounting methods is best for cash flow?
Arbitrage Financial is offering two possible investments with the same level of risk.
Your firm is considering a project with a five-year life and an initial cost of $120,000. The discount rate for the project is 12%. The firm expects to sell 2,100 units a year. The cash flow per unit is $20. The firm will have the option to abandon t..
Depreciation:
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