Gilbert is considering purchasing the side steamer

Assignment Help Financial Management
Reference no: EM13870686

Gilbert is considering purchasing the Side Steamer 3000 which cost $12,000 and has an estimated useful life of 6 years with an estimate salvage value of $1,500. This steamer falls into the NARC 5-year class with rates as 20.00%, 32.00%, 19.20%, 11.52%, 11.52% and 5.76%. The new steamer sales will raise by $2,000 per year; the new would reduce operating expenses by $1,900 per year. To support the greater sales, the new machine would require that inventories increase by $2,900, but accounts payable would simultaneously increase by $700. Gilbert’s marginal federal-plus tax rate is 40% and its WACC is 15%. Should it replace the old steamer?

Reference no: EM13870686

Questions Cloud

Increase next years dividend to share : Consolidated now decides to increase next year’s dividend to $20 a share, without changing its investment or borrowing plans. Thereafter the company will revert to its policy of distributing $10 million a year. a. What will be the total present value..
Depreciate against the dollar from its spot rate : You expect that the INR will depreciate against the dollar from its spot rate of $.0.15 to $.0.125 in 60 days. The following interbank lending and borrowing rates exist: How can you profit from the above given information. Estimate the profits that c..
What is the effective annual rate on this arrangement : A firm sells its $1,160,000 receivables to a factor for $1,136,800. The average collection period is 1 month. What is the effective annual rate on this arrangement?
What is the current value of operations for Office Max : Office Max is a fast growing supplier of office products. Analysts project the following cash flows (FCFs) during the next 5 years, after which FCF is expected to grow at a constant rate of 7 percent. Office Max’s cost of capital (WACC) is 11%.  What..
Gilbert is considering purchasing the side steamer : Gilbert is considering purchasing the Side Steamer 3000 which cost $12,000 and has an estimated useful life of 6 years with an estimate salvage value of $1,500. This steamer falls into the NARC 5-year class with rates as 20.00%, 32.00%, 19.20%, 11.52..
What is the effect of depreciation on his amity : Lorenzo owns two apartment buildings. He acquired forsythia acres on February 21, 1998, for $300,000. Neither apartment complex qualifies for low income housing. if Lorenzo elects to write off the cost of each building as quickly as possible, what is..
What is yield to maturity : The Timberlake-Jackson Wardrobe Co. has 10.1 percent coupon bonds on the market with ten years left to maturity. The bonds make annual payments. If the bond currently sells for $1,155.73, what is its YTM? (
A reverse annuity mortgage is made with balance : A reverse annuity mortgage is made with a balance not to exceed $300,000 on a property now valued at $700,000. The loan calls for monthly payments to be made to the borrower for 120 months at an interest rate of 11% MEY. What will the monthly payment..
What is the expected capital gains yield : Bond P is a premium bond that carries a 10% coupon rate. A separate bond-Bond D is a discount bond and has a 4% coupon rate. Each of these bonds makes an annual payment (not semi annual) and has a 7% YTM with 10 full years until they mature. Assume t..

Reviews

Write a Review

Financial Management Questions & Answers

  Sales increase-having to raise funds externally

Pierce Furnishings generated $2 million in sales during 2012, and its year-end total assets were $1.4 million. Also, at year-end 2012, current liabilities were $500,000, consisting of $200,000 of notes payable, $200,000 of accounts payable, and $100,..

  Applying results to both unlevered and levered firms

When calculating WACC and applying the results to both unlevered (no debt) and levered (debt) firms, the levered firm is shown to be more valuable. Two identical firms and the firm with debt is more highly valued. Does this make sense? Why or Why not..

  What is beta of this portfolio rounded to the tenth place

You are the money manager of a 5 stock portfolio with the following investment amounts in each one: $10 million, $2 million, $5 million, $6 million and $500,000. The betas of the 5 stocks are 1.25, -1.75, 1.00, 0.75 and 1.9, respectively. The market'..

  Cost benefit analysis

Use the cost benefit analysis to recommend to Smith whether Sun Gas should proceed will the Web based ordering system. Give your reasons, showing supporting calculations.

  Shares of stock outstanding-what is the value of the firm

A firm has 100,000 shares of stock outstanding. The firm is considering borrowing $1.3 million at 7.5% interest and using the loan proceeds to repurchase 20,000 shares of stock. What is the value of the firm? Ignore Taxes.

  What is the value of preferred stock

Ezzell Corporation issued preferred stock with a stated dividend of 10 percent of par. Preferred stock of this type currently yields 8 percent, and the par value is $100. Assume dividends are paid annually. What is the value of Ezzell's preferred sto..

  Financial services within one financial institution

There are two types of exchanges in the secondary market for capital securities: organized exchanges and over-the-counter exchanges.

  What is the amount of each annuity payment

Uptown Insurance offers an annuity due with semi-annual payments for 25 years at 6 percent interest. The annuity costs $200,000 today. What is the amount of each annuity payment?

  Inventory and then collect the payment on the sale

Syed's Industries has accounts receivable of $700, inventory of $1,200, sales of $4,200, and cost of goods sold of $3,400. How long does it take Syed's to both sell its inventory and then collect the payment on the sale?

  To keep a list of complete details for all sources

1- Identify your company's mission, vision, objectives, and posted strategies. You may need to consult outside resources, so be sure to keep a list of complete details for all sources you use.

  Value of one share to investor who requires rate of return

Mc Donalds corp. preferred stock pays an annual dividend of $5 per share. Calculate the value of one share to an investor who requires a rate of return of : Calculate the yield of the Mc Donalds corp preferred stock of problem 13 if its market price ..

  Initial cash flow is negative

Assume a project has normal cash flows (i.e., the initial cash flow is negative, and all other cash flows are positive). Which of the following statements is most correct?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd