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Georgia Power is contemplating replacing an oil powered generator with a solar power generator. The old generator was purchased 22 years ago and is being depreciated over its 25 years life to a zero salvage value using straight-line depreciation. The old generator has a book value of $4.5 million but could be sold today for $3.0 million. The solar powered generator would cost $10 million and be depreciated over a 3 year life using MACRS (.33, .45, .15, .07). Due to the rapidly changing technology, it is anticipated that the new generator would be sold after 3 years for $1.0 milion. The new generator is expected to save Georgia Energy $10 million a year during its 3 year life. Georgia Energy will need to increase capital by $1.5 million. The company's WACC is 10% and the tax rate is 35%. What is the project's NPV? Should the oil powered generator be replaced?
Walker & Campsey wants to invest in a new computer system, and management has narrowed the choice to Systems A and B. System A requires an up-front cost of $100,000, after which it generates positive after-tax cash flows of $60,000 at the end of each..
The Montana Hills Co. has expected earnings before interest and taxes of $8,100, an unlevered cost of capital of 11%, and debt with both a book and face value of $12,000. The debt has an annual 8% coupon. The tax rate is 34%. What is the value of the..
the donley brothers company had encountered the problem of latent defects in some of its purchased castings. being
Becky Fenton has 25/50/10 automobile insurance coverage. If two other people are awarded $45,000 each for injuries in an auto accident in which Becky was judged at fault, how much of this judgment would the insurance cover?
Who are the major policy makers for the Federal Reserve System and how do they rise to such an influential position? How do these policymakers influence national economic objectives? Refer to Figure 5.1 on page 100 of the textbook. What part of this ..
top gun records and several movie studios have decided to sign a revenue-sharing contract for dvds. each dvd costs the
The operating cost of a new machine is $500 for the first year. Starting the second year, the operating cost increases by $200 per year for the next 10 years. Calculate the equivalent annual operating cost of the machine. What will be the present and..
questiona six-month call options with strike prices of 45 and 50 cost 7 and 4 in that order1 describe the maximum gain
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?
Hazel Morrison, a mutual fund manager, has a $60 million portfolio with a beta of 1.00. The risk free rate is 3.25%, and the market risk premium is 6.00%. Hazel expects to receive an additional $40 million, which she plans to invest in additional sto..
Chuck Brown will receive from his investment cash flows of $3,145, $3,500, and $3,810 at the end of years 1, 2 and 3 respectively. If he can earn 7.5 percent on any investment that he makes, what is the future value of his investment cash flows at th..
Based on the security market line, company C-A stock has a required return of 7% and company C-B has a required return of 5%. C-A has a standard deviation of returns of 9%.
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