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ABC Company will purchase a machining center for $1,500,000. ABC will depreciate the machining center using MACRS depreciation. The machining center will be leased to a manufacturing company who will pay ABC $350,000 annually for 8 years. At the end of the period, the machining center will belong to the manufacturing company. ABC has a 34% incremental tax rate with a 10% after tax MARR. Is this a good investment for ABC?
You own a stock that you think will produce a return of 11 percent in a good economy and 3 percent in a poor economy.
Northwest Utility Company faces increasing needs for capital. Fortunately, it has an Aa3 credit rating. The corporate tax rate is 30 percent. Northwest’s treasurer is trying to determine the corporation’s current weighted average cost of capital in o..
Assume the Federal Reserve raises interest rates (the yield curve makes an instantaneous parallel shift up of 1.0%)
Cruiseliners, Inc. has 230,000 shares of common stock outstanding at a market price of $40 a share. Cruiseliners' just paid an annual dividend in the amount of $1.75 per share. The dividend growth rate is 3 percent. The bonds are selling at 102 perce..
Romboski, LLC, has identified the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 −$ 57,000 −$ 57,000 1 33,000 20,300 2 27,000 24,300 3 19,500 29,000 4 13,400 25,300 Requirement 1: (a) What is the IRR for each of these p..
The Faulk Corp. has a 6 percent coupon bond outstanding. What does this problem tell you about the interest rate risk of lower coupon bonds?
A company has a wacc equal to 15.00%, a constant and perpetual expected EBITDA equal to 3,100,000 Euro, an unlevered return on equity of 22.53% and it keeps a constant debt-to-equity ratio. If the tax rate is equal to 25% and the assets are fully dep..
The Fed cuts the Federal Funds rate and the Discount rate and the Prime goes down to 3.5 percent. Al Truistyk owns an exercise center and needs to upgrade his equipment in order to meet his customers’ needs. The equipment costs $275,000 and the lende..
In which decade did the number of failures (of commercial banks and thrifts) per year average more than 100? Given the following information about a fully amortizing loan, calculate the lender’s yield (rounded to the nearest tenth of a percent). Loan..
Describe what episodes you watched and what the problems were that caused the business to be failing.
An engineering company in Virginia that owns 250 acres of valuable land has decided to lease the mineral rights to a mining company. The primary objective is to obtain long term income to finance ongoing projects 5 and 15 years from the present time...
The all equity firm (it has no debt and so pays no interest) has shareholders who require 10% return on their invested capital. All of the firm’s capital is tied up in operating activities. The firm’s ROIC = 16%. Earnings before tax is $100 and the f..
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