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Vandalay Industries is trying to choose between two alternative (mutually exclusive) machines. Whichever machine is selected will be utilized for the foreseeable future (in addition, for the foreseeable future, all revenues, costs and expenses are expected to remain unchanged). Machine A costs $2,400,000 and will last (economic life) four years. Variable costs will be 35% of sales, and fixed costs are $180,000 per year. The machine will be depreciated over 3 years, straight line. Sales revenues will be $2,000,000 per year. Machine B costs $3,300,000 and will last (economic) five years. Variable costs will be 30% of sales, and fixed costs are $110,000 per year. The machine will be depreciated over 3 years, straight line. Sales revenues will be $2,000,000 per year. The required return is 10% and the tax rate is 40%. Which machine, if either, should Vandalay Industries select? Be sure to provide quantitative justification for your answer.
What condition is necessary for the warrants to be exercised? How much total money will the company raise as a result of this security issue, if all warrants are exercised?
Nonconstant growth Microtech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Microtech to begin paying dividends, beginning with a dividend of $1.25 comin..
You wish to buy a $14,000 dining room set. The furniture store offers you a five-year loan with a 11 percent APR. What are the monthly payments? What are the monthly payments if you only paid interest over the length of the loan and your principal ba..
What three factors are important to consider in determining a target debt to equity ratio?
Jackson corporation's bonds have 12 years remaining to maturity. interest is paid annually, the bonds have a $1000 per value, and the coupon interest is 8%. the bonds have a yield to maturity of 9%. what is the current market price of these bonds?
Analysis of 60 monthly rates of return on United Futon common stock indicates a beta of 1.58 and an alpha of –0.33% per month. A month later, the market is up by 6.3%, and United Futon is up by 7.3%. What is Futon’s abnormal rate of return?
A bond has a $1,000 par value, 10 years to maturity, and a 7% annual coupon sells for $985. What is its yield to maturity? You are planning to make annual deposits of $4,320 into a retirement account that pays 8 percent interest compounded monthly. H..
An all-equity business has 100 million shares outstanding selling for $20 a share. Management believes that interest rates are unreasonably low and decides to execute a leveraged recapitalization ( a recap). It will raise $1 billion in debt and repur..
Why did reporting of stock options go “unnoticed” for so long? Explain your view.How many of the companies do you recognize? How many of the companies do you recognize as “ethical” companies?
At one point, Greg was having four packs of gum a day. Each pack of gum costs $2.00 Greg decides to cut his gum usage to 2 packs a day and invest his savings in large-cap stocks with a yield of 12.7% per year historically. Greg has 30 years to invest..
Annuity Values Betty's Bank offers you a $7,000, six-year term loan at 10 percent annual interest. What will your annual loan payment be?
All of the following will make the break-even point increase, other things equal, EXCEPT
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