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Burlington Motor Carriers, a trucking company, is considering installing a two-way mobile satellite messaging service on its 2,000 trucks. On the basis of tests done last year on 120 trucks, the company found that satellite messaging could cut 60% from its $5 million bill for long-distance communication with truck drivers. More importantly, the drivers reduced the number of “deadhead” miles those driven with non paying loads by 0.5%. Applying that improvement to all 230 million miles coverd by the Burlington fleet each year would produce an extra $1.25 million savings.Equipping all 2,000 with the satellite hookup will require an investment of $8 million and the construction of a message-relaying system costing $2million. The equipment and onboard devices will have a service life of eight years and negligible salvage value; they will be depreciated under the five-year MACRS class. Burlington’s marginal tax rate is about 38%, and its required minimum attractive rate of return is 18%(a) Determine the annual net cash flows from the project.(b) Perform sensitivity analysis on the project’s data, varying savings in telephone bills and savings in deadhead miles. Assume that each of these variable can deviate from its base-case expected value +-10%, +-20% and +-30%(c) Prepare sensitivity diagrams and interpret the results.
surfin bubba surfboard shop is currently selling for 34.25 a share with a current dividend of 1.00. it is estimated
Describing the importance of the concept of present value therefore important for corporate finance and is often the very first topic taught in any finance class.
4. Tracer Manufacturers issued a 10-year bond six years ago. The bond's maturity value is $1,000, and its coupon interest rate is 6 percent. Interest is paid semiannually. The bond matures in four years. If investors require a return equal to 5 pe..
What rate of return would you expect on a 5-year Treasury security, assuming the pure expectations theory is valid? Disregard cross-product terms, i.e., if averaging is required, use the arithmetic average.
The CFO believes that a move from zero debt to 55.0% debt would cause the cost of equity to increase from 10.0% to 13.0%, and the interest rate on the new debt would be 8.0%. What would the firm's total market value be if it makes this change?
Projected fixed costs are $742,000 and the anticipated annual operating cash flow is $211,000. What is the degree of operating leverage for this project?
Quantum and Aquafin Products. Senior managers at Quantum Products are evaluated in terms of rise in profit.
If the firm has $4 million per day in collections and $3 million per day in disbursements, how many dollars has the cash management system freed up?
The firm purchase $500,000 of equipment during the year while increasing its inventory by $300,000 (with no corresponding increase in current liabilities). The marginal tax rate for Provo is 40 percent. What is Provo's cash flow from operations fo..
Your firm is cash-based. Ignore any income tax implications. Determine the consequences of this transaction for each of the following.
Dividends are expected to grow at a rate of 11 percent per year for the next 4 years and then to continue growing thereafter at a rate of 5 percent per year. What is the current value of a share of Seneca common stock to an investor who requires a..
critically reflect on the importance of capital budgeting.why is this such a heated subject in many boardrooms? how
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