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Massey Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $520,000 is estimated to result in $215,000 in annual pretax cost savings. The press falls in the MACRS five-year class, and it will have a salvage value at the end of the project of $87,000. The press also requires an initial investment in spare parts inventory of $25,000, along with an additional $3,000 in inventory for each succeeding year of the project. The shop’s tax rate is 34 percent and its discount rate is 10 percent. Refer to Table 6.8. Calculate the NPV of this project.
ou own a bond portfolio and expect the market interest rate to increase for the foreseeable future. (a) What should you do with regards to the Duration of the portfolio and your own investment horizon? (b) What are the two reasons for doing so?
A bond has a par value of $1,000, a time to maturity of 10 years, and a coupon rate of 8.70% with interest paid annually. If the current market price is $870, what will be the approximate capital gain of this bond over the next year if its yield to m..
Consider the following two $10,000 loans: 6% per year with 20 annual payments. 5% per year with 10 annual payments. If you face a MARR of 20% which of these two loans would be preferred?
Prepare a brief report (3–5 paragraphs) on how equity financing compares to debt financing. What factors need to be considered when choosing an appropriate method? What advantages/disadvantages exist with each type?
Why do many organizations choose not implement this process? Do you believe the cost and infrastructure overhead of implementing the Orion Strategy Process is worth the benefits? Why or why not? Without performing all of the steps within the Orion St..
Rozetta Manufacturing Company (RMC) is considering the purchase of a new equipment to replace the old one. The old equipment was purchased 5 years ago at a cost of $20,000, and it is being depreciated on a straight-line basis to a zero salvage value ..
The total value (debt plus equity) of Wilson Dover Inc. is $500 million and the face value of its 1-year coupon debt is $200 million. The volatility (σ) of Wilson Dover's total value is 0.60, and the risk-free rate is 5%. Assume that N(d1) = 0.9720 a..
You have accumulated some money for your retirement. You are going to withdraw $91,026 every year at the beginning of the year for the next 18 years starting from today. How much money have you accumulated for your retirement? Your account pays you 1..
A bond with face and redemption amount of $3000 with annual coupons is selling at an effective annual yield rate equal to twice the coupon rate. The present value of the coupons is equal to the present value of the redemption amount. What is the sell..
How large can the capital budget be before common stock must be sold and what is the cost of Haroldson's retained earnings?
How can currency futures be used by corporations? How can currency futures be used by speculators? Forward versus futures contracts. Compare and contrast forward and futures contracts.
A new piece of equipment costs $18,000 with a residual value of $600 and an estimated useful life of five years. Assuming twice the straight-line rate, the book value at the end of year 2 using the declining balance method is? A 11,520 B 6,480 C 18,0..
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