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Dog Up! Franks is looking at a new sausage system with an installed cost of $455,000. This cost will be depreciated straight-line to zero over the project’s five-year life, at the end of which the sausage system can be scrapped for $65,000. The sausage system will save the firm $235,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $24,000. If the tax rate is 34 percent and the discount rate is 10 percent, what is the NPV of this project? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
Miller Mfg. is analyzing a proposed project. The company expects to sell 11,000 units, give or take 4 percent. The expected variable cost per unit is $7.00 and the expected fixed cost is $35,000. The fixed and variable cost estimates are considered a..
The capital budgeting director of Spar Corporation is evaluating a project which costs $280,000, is expected to last for 10 years and produce after-tax cash flows, including depreciation, of $42,500 per year. As soon as the project ends, we will sell..
An investment is expected to generate $1,000,000 each year for 4 years. If the firm's cost of funds is 10%, what is the maximum amount the firm should pay for the investment?
Obsolete Computer Systems, Inc. wants to emerge as a major producer of computer software. The company has two options: Either it can purchase Upstart Software for $25m now whose products are expected to survive 5 years. As a member of Obsolete’s boar..
Most utilities company in the United States pay regular dividends to their stockholders. On the other hand most of high tech companies pay little or no dividends. Discuss why they behave the way they do.
Suppose Netflix is considering the purchase of computer servers and network infra- structure to facilitate its move into video-on-demand services. In total, it will purchase $48 million in new equipment. What is the lease rate for which the lessor wi..
An oil drilling company must choose between two mutually exclusive extraction projects, and each costs $11 million. Under Plan A, all the oil would be extracted in 1 year, producing a cash flow at t = 1 of $13.2 million. Find the crossover rate. Is i..
Inflation is expected to be 3 percent over the next year. You desire an annual real rate of return of 2.5 percent on your investments. What nominal rate of interest would have to be offered on a one-year Treasury security for you to consider making a..
In 2002 Clanton, Inc. had a gross profit of $27,000 on sales of $110,000. Clanton's operating expenses for 2002 were $13,000, and its net profit margin was .0585. Clanton had no interest expense in 2002. What was Clanton's gross profit margin for 200..
For a company whose target capital structure calls for 50% debt and 50% common equity, which of the following statements is CORRECT
A pension plan is obligated to make disbursements of $1.4 million, $2.4 million, and $1.4 million at the end of each of the next three years, respectively. Find the duration of the plan's obligations if the interest rate is 8% annually.
Without changing anything regarding its product or operations, the CEO of a company wants to increase the ROE of his company. What could he possibly do? Be sure to state the steps.
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