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Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $3 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life. The project is estimated to generate $2,180,000 in annual sales, with costs of $875,000. The project requires an initial investment in net working capital of $400,000, and the fixed asset will have a market value of $260,000 at the end of the project. If the tax rate is 30 percent, what is the project’s Year 0 net cash flow? Year 1? Year 2? Year 3? If the required return is 9 percent, what is the project's NPV?
Advance, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 10 years to maturity that is quoted at 109 percent of face value. The issue makes semi annual payments and has a coupon rate of 4 percent annually. Wha..
In evaluating long-term capital budgeting decisions using the discounted cash flow method, the net present value calculation that produces a negative (less than $0) amount is interpreted correctly in only one of the following. A definite signal to in..
You are going to receive $205,000 in 50 years. What is the difference in present value between using a discount rate of 14 percent versus 9 percent? Use Appendix B as an approximate answer, but calculate your final answer using the formula and financ..
The personal auto policy contains several coverages that meet the insurance needs of typical insured individuals. For each of the following coverages, briefly describe the type of coverage provided, and give an example of a loss that would be covered..
Photochronograph Corporation (PC) manufactures time series photographic equipment. It is currently at its target debt-equity ratio of .63. It’s considering building a new $65.3 million manufacturing facility. If the tax rate is 38 percent, A new issu..
If an investment has a 20%(0.20) probability of returning $1,000; a 30%(0.30) probability of returning $1,500; and a 50%(0.50) probability of returning $1,800; the expected value of the investment is: Uncertainties that are not quantifiable: Suppose ..
Land is purchased for 75000. It is agreed for the land to be paid for over a 5 year period with compounding annual interest at 12%. Each payment is 3000 more than the previous. What is the size of the last payment?
find at least two articles from the proquest database that highlight and discuss two of the biggest challenges facing
Future Value Annuity You are planning to make monthly deposits of $400 into a retirement account that pays 10 percent interest compounded monthly. If your first deposit will be made one month from now. how large will your retirement account be in 30 ..
Digital Organics (DO) has the opportunity to invest $0.98 million now (t = 0) and expects after-tax returns of $580,000 in t = 1 and $680,000 in t = 2. The project will last for two years only. The appropriate cost of capital is 14% with all-equity f..
A couple bought a $300,000 home four years ago using a 15 year loan with an annual rate of 4.5% and a 20% down payment. What would be their monthly payments? Today they want to use a home equity line of credit to pay off some credit card debt. How mu..
Starting again with the conditions in part a, what is capital increases by 5% so that it is now 420. By how much does output increase?
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