Find the minimum pretax earnings per year

Assignment Help Financial Management

Reference no: EM13920439

El Paso Company is planning to get a machine that will cost $14,000 and is expected to last for 7 years. The company uses straight-line depreciation. The tax rate of El Paso is 31% and the proper discount rate in this case is 12%. Find the minimum pretax earnings per year that the machine must generate to become profitable. The machine is expected to have $4000 pretax earnings annually, with a standard deviation of $1000. Calculate the probability that the machine will turn out to be profitable. Show solutions.

Reference no: EM13920439

Questions Cloud

Purpose of conducting an experiment : 2. What is the purpose of conducting an experiment? How does an experimental design accomplish its purpose? 3. What are the advantages and disadvantages of an experimental design in an educational study? 4. What is more important in an experimental ..

Consumer-oriented promotional strategies : Select one (1) of the following categories of products to research: sports apparel, automobiles, home furnishings, or televisions. Use the Internet to research at least two (2) companies within the selected product category. Take note of the leadi..

Description of the neural impulse : Refer to the "Learning the External Parts of the Neuron" animation. -A description of the neural impulse -The stages of neural conduction -The function of the primary neurotransmitters

Understanding of key concepts : Part I checks your understanding of key concepts from Jackson and Trochim & Donnelly. Answer the following questions:

Find the minimum pretax earnings per year : El Paso Company is planning to get a machine that will cost $14,000 and is expected to last for 7 years. The company uses straight-line depreciation. The tax rate of El Paso is 31% and the proper discount rate in this case is 12%. Find the minimum pr..

Destroying your personal home : The decline in value of a personal car Giving your children $50,000,000 A Hurricane destroying your personal home

Police in the fight against crime : As the United States becomes more diverse, the responsibilities expected of police in the fight against crime are becoming progressively more difficult to accomplish. The most effective approaches to crime prevention are community policing and red..

What is an f-ratio : 1. Jackson, even-numbered Chapter Exercises, pp. 308-310. 2. What is an F-ratio? Define all the technical terms in your answer. 3. What is error variance and how is it calculated?

Calculate the present value of depreciation : George bought a piece of equivalent for $28,000. The equipment has a useful life of 4 years and a salvage value of $2,000 at the end of its useful life. Assume that the annual interest rate is 9%. Calculate the present value of depreciation, using th..

User Account

All Pages