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A machine can be purchased for $10,500, including transportation charges, but installation costs will require $1,500 more. The machine is expected to last four years and produce annual cash revenues of $6,000. Annual cash operating expenses are expected to be $2,000, with depreciation of $3,000 per year. The firm has a 30 percent tax rate.a. Determine the relevant after-tax cash flows and prepare a cash flow schedule.b. Calculate the payback period for the machine.c. If the projects cost of capital is 10 percent, would you recommend buying the machine?d. Estimate the internal rate of return for the machine.
Describe Forecasting of net income using EBIT-EPS analysis and what will be the forecast for Robert's year-end net income
Grateway Corporation has a weighted average cost of capital of 11.5%. Its target capital structure is 55 percent equity and 45% debt. The company has sufficient retained earnings to fund the equity portion of its capital budget.
The following conditions involve the application of time value of money concept. Janelle Carter deposited $9,750 in the bank on January 1, 1991, at the interest rate of 11% compounded annually. How much has accumulated in account by January 1, 2008?
A position has modified duration of 25 years is worth $100 million. The term structure is flat. By how much does the value of position change if interest values change through 25 basis points?
Suppose you were given an opportunity to own a business of your choosing. First, briefly describe your business; then explain the most efficient way to raise capital to either start or expand your business. Provide support for your response.
A stock priced at 50 can go up or down by 10 percent over two periods. The risk-free rate is 4 percent. What is the correct price of an American put with an exercise price of 55?
Assume that $ 750 is invested at 7%interested, compounded semiannually. Given that A=(1+r/n)^nt-Find out the amount of money in the at t=1,6,10,15 and 25 years
Computation of value of perpetuity and annuity and which alternative should you choose ignoring tax consequences
Describe a company's cost of capital and how it is calculated. What is marginal cost of capital and how does it differ from weighted average cost of capital?
Suppose that the risk-free rate of interest is 7.3 percent and that the market risk premium is 14.1 percent. Determine the required rate of return on a stock that has a beta of 0.3?
You are heading up your firm's capital investment evaluation efforts. Currently, the capital investment group is deliberating over the three investment proposals below.
The market consensus is that SuperSmart Corporation has ROE = 16% and a beta of 1.25, and an expected earnings per share (E1) of $3.16. The market believes that Super Smart Corporation plans to maintain indefinitely its retention ratio.
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