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A medical lab wants to upgrade its MRI machine. Their financial department assessed that the lab will add about $250,000 to their annual revenues. The cost of operating and maintaining the new machine is $15,000 per year, and additional labor & material expenses will be $40,000 yearly. The lab expects to use the new MRI for five years, after which its salvage value will be zero. The MRI machine falls into a three-year class MACRS depreciation. The lab’s tax rate is 40% and its after-tax MARR is 16%.
A) How much can the lab afford to pay for the MRI machine?
B) Vendor A, who offers the MRI machine at the price determined in question a) states that the lab's annual revenues will be $290,000, while vendor B offers to sell them the MRI machine for $420,000. In both cases all the other givens remain unchanged. Which vendor should the company choose?
After an intensive research and development effort, two methods for producing playing cards have been identified by the Turner Company. One method involves using a machine having a fixed cost of $10,000 and variable costs of $1.00 per deck of cards.
Project Cash Flows You are evaluating a project for The Ultimate recreational tennis racket, guaranteed to correct that wimpy backhand. You estimate the sales price of The Ultimate to be $400 per unit and sales volume to be 1,000 units in year 1; 1,2..
Does the effect of Russian inflation on the decline in the rouble's value support the PPP theory? How might the relationship be distorted by political conditions in Russia?
If a bank has 10 billion dollars of 1-year loans and 40 billion dollars of 5-year loans, which are financed by 30 billion dollars of 1-year deposits and 20 billion dollars in 5-year deposits. If interest rates increase by 1 percent every year for the..
The Losers company has sales of 19,500, costs of 17,300, depreciation expense of 1650 and interest expense of 1460. If the tax rate is 35 percent, what is the operating cash flow or OCF?
The shareholders' equity of Green Corporation includes $480,000 of $1 par common stock and $590,000 par value of 7% cumulative preferred stock. The board of directors of Green declared cash dividends of $69,000 in 2013 after paying $39,000 cash divid..
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Ying Import has several bond issues outstanding, each making semiannual interest payments. The bonds are listed in the following table
You are planning your retirement in 10 years. You currently have $168,000 in a bond account and $608,000 in a stock account. You plan to add $7,200 per year at the end of each of the next 10 years to your bond account. The stock account will earn a r..
Estimate the average Social Security benefits for a retired couple. Assume that one spouse has a part-time job that pays him $21,000 a year, and that this person also receives another $44,000 a year from a company pension.
Sqeekers Co. issued 12-year bonds a year ago at a coupon rate of 7.8 percent. The bonds make semi annual payments and have a par value of $1,000. If the YTM on these bonds is 6.1 percent, what is the current bond price?
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