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The PARC Co. Inc. asked you to determine some of the after-tax cash flows for equipment used for research and development that is being considered. PARC expects the equipment to operate for five years and to require the purchase of $250,000 worth of capital equipment. The capital equipment will have a resale value of $100,000 at the end of the five years.
PARC plans to use MACRS depreciation schedule for income tax calculations. The income tax rate is 35%. (Use same rate for capital gain/loss). PARC uses an after tax MARR of 12%.
The equipment results in an increase in PARC's before-tax annual, net income of $45,000, find if it is worth investing on this equipment.
calculate the present value of this security. Use the constant growth model to find the stock value.- Determine the value of the stock using the new dividend and required return from part b.
What are the main differences between the NPV method and the IRR? Assumptions on reinvestment and anything else. When does the IRR give you the wrong answers? How does the MIRR avoid the IRR shortcomings?
What is the yield to call of a 30-year to maturity bond that pays a coupon rate of 11.98 percent per year, has a $1,000 par value, and is currently priced at $918? The bond can be called back in 7 years at a call price $1,089. Assume annual coupon pa..
Paying off credit cards Simon recently received a credit card with an 13% nominal interest rate. With the card, he purchased an Apple iPhone 5 for $400. The minimum payment on the card is only $10 per month. If Simon makes the minimum monthly payment..
A project has a discount rate of 14 percent, an initial cost of $99,200, an inflow of $56,400 in year 1 and an inflow of $75,900 in year 2. Your boss requires that every project return a minimum of $1.06 for every $1 invested. Based on this informati..
What is the duration of a two-year bond that pays an annual coupon of 12 percent and has a current yield to maturity of 14 percent? Use $1,000 as the face value.
You win the lottery and can choose between 20 annual payments (beginning today) of $50,000 or $684,936 as a lump sum today. What is the discount rate the government must be using to calculate the lump sum payment assuming annual compounding?
Consider three investments: Investment A, investment B and Investment C with the costs of 600, 500 dollars and 400 dollars respectively. Investment A will bring you a cash flow of 100, 200 and 300 at the end of years 1, 2 and 3 respectively.
You see a fast growing company that is estimated to have dividend growth of 24%, 20%, and 16% over each of the next three years (24% in year 1 in year 2 20% and in year 3 16%) The company paid a dividend of $2.28 per share over the past twelve months..
Assume you have purchase a 10 year bond, which offers a nominal rate of return of 14%. You would like to know the real rate of return including the factor of inflation. what is the real rate of return? Assuming a 5% inflation rate, what is the real r..
Healthy Potions, Inc., a pharmaceutical company, bought a machine at a cost of $2 million five years ago that produces pain-reliever medicine. The machine has been depreciated over the past five years, and the current book value is $700,000. What are..
There are three mutually exclusive alternatives that are candidates for implementation by the Yellow Freight Company’s sorting operations center, and doing nothing is not an option. All alternatives have a life of 10 years, and they have negligible m..
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