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A contractor must choose between buying or renting a crane for the duration of a 4 year construction project. The contractor uses an MARR of 8%. The crane costs $500,000 and can be sold for $350,000 after 4 years. The cost to operate and maintain the crane is $250,000 per year. Renting the crane costs $310,000 per year including all operating and maintenance costs. Determine the incremental benefit-cost ratio that the contractor should use to decide between buying and renting. Express your answer to two decimal places.
Estimate the required return on Curt's Adventures, Inc. under the following conditions: Average stock is returning 11%. Short-term Treasury bills yield equals 5%.
introductionmany believe that business entities should have an ethical duty to be socially responsible to work towards
Gillian Stationary Corporation needs to raise 600,000 to improve its manufacturing plant. It has decided to issue a 1000 par value bond with an annual percentage rate of 8.0 percent with interest paid semi annually and a 10 year maturity. Investors r..
An economic recession has increased charity care and bad debts from 4 percent to 6 percent of net revenues. The board asks for "all possible" cost reductions, and one board member notes that the internal consulting activity consumes more than $1 mill..
An auto-parts company is deciding whether to sponsor a racing team for a cost of $1000000. The sponsorship would last for 3 years and is expected to increase cash flows by $570000 per year. If the discount rate is 6.9%, what will be the change in the..
Suppose the yield on short-term government securities (perceived to be risk-free) is about 4%. Suppose also that the expected return required by the market for a portfolio with a beta of 1 is 12%. According to the capital asset pricing model: What is..
Consider the following cash flow: Year Cash Flow 2) $22,300 3)$40,300 5) $58,300. Assume an interest rate of 9.1 percent per year. what is the future value of the cash flows five years from now?
Two factors that cause the investor's required rate of return to differ from the company's cost of capital are_____.
Suppose that competition amongst bond brokers causes bonds to become more liquid. Using the liquidity preference model, show graphically how this will affect money demand and the nominal interest rate
The flow of funds through a firm would be as follows:
Why is it important to evaluate capital budgeting projects on the basis of incremental cash flows? Distinguish between three basic cash flow components of a capital project 1) Initial investment 2) Operating cash inflows 3) Terminal cash flows
Bond J is a 4 percent coupon bond. Bond K is a 10 percent coupon bond. Both bonds have 17 years to maturity, make semiannual payments, and have a YTM of 7 percent. If interest rates suddenly rise by 2 percent, what is the percentage price change of t..
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