Midpoint in asset depreciation range

Assignment Help Financial Management

Reference no: EM131933827

Universal Electronics is considering the purchase of manufacturing equipment with a 10-year midpoint in its asset depreciation range (ADR). Carefully refer to Table 12–11 to determine in what depreciation category the asset falls. (Hint: It is not 10 years.) The asset will cost $285,000, and it will produce earnings before depreciation and taxes of $92,000 per year for three years, and then $45,000 a year for seven more years. The firm has a tax rate of 30 percent. Assume the cost of capital is 13 percent. In doing your analysis, if you have years in which there is no depreciation, merely enter a zero for depreciation. Use Table 12–12. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. blo61612_app_A-A8.pdf a. Calculate the net present value. (Do not round intermediate calculations and round your answer to 2 decimal places.) Net present value $ b. Based on the net present value, should Universal Electronics purchase the asset? Yes No

Reference no: EM131933827

Questions Cloud

Estimate their cost of capital : Angell Inc. hired you as a consultant to help them estimate their cost of capital. If firm uses retained earnings and does not issue any new What is its WACC?

What value would mm now estimate for each firm : What value would MM now estimate for each firm? What is rs for Firm U? For Firm L?

Calculate net present value-should investment be undertaken : The Spartan Technology Company has proposed contract with the Digital Systems Company of Michigan. Calculate the net present value.

Stock is less relative to earnings generated by firm : Other investors view a low P/E as a ‘value,’ meaning the price paid for the stock is less relative to the earnings generated by the firm itself.

Midpoint in asset depreciation range : Universal Electronics is considering the purchase of manufacturing equipment with a 10-year midpoint in its asset depreciation range (ADR).

Choices for marital status-what are you violating : The 1003 gives three choices for marital status. Can you ask Irma if she is divorced for this question? What are you violating?

Estimated life of leased property : Calculate the lease period as a percentage to the estimated life of the leased property.

Net interest margin : Petri Bank had interest revenues of $70 million last year and $30 million in interest expenses. Petri Bank's net interest margin is ____ percent.

Should the sunbelt corporation refund the old issue : Calculate the present value of total outflows. Calculate the net present value. Should the Sunbelt Corporation refund the old issue?

User Account

All Pages