Reference no: EM131346154
Wayne’s Weinie Works has found an opportunity to purchase a more efficient weinie machine. It is expected that the new machine will generate revenues of $32,000 and expenses of $12,000 per year during its 5 year life. It would replace a machine that would generate revenues of $25,000 and expenses of $16,000 for each of the next 5 years.
If purchased, the new machine will cost $28,000 Plus $4,000 in shipping and set-up costs. Due to the increase in efficiency, a one time reduction of the inventory of meat scraps will be $3,000 and current liabilities will also decrease by $1,000. The machine will be depreciated on a 5 year schedule (.20, .32, .19, .12, .11, .06). It will be worth $6,000 in 5 years.
The old machine is 2 years old and costs $25,000 new. It is also on a 5 year depreciation schedule and could be sold today for $15,000. If it is not sold today it’s estimated value will be $4,000 in 5 years. The company has a 40% marginal tax rate and the WACC is 9%.
?"I'm not to sure what I'm even supposed to do with this problem. Hopefully someone can help work it out"
What is the maximum price per share schultz should pay
: Schultz Industries is considering the purchase of Arras Manufacturing. Arras is currently a supplier for Schultz, and the acquisition would allow Schultz to better control its material supply. What is the maximum price per share Schultz should pay fo..
|
Future semiconductors is evaluating a new etching tool
: Future Semiconductors is evaluating a new etching tool. The equipment costs $916,000 and will generate after-tax cash inflows of $369,000 per year for six years. Assume the firm has a 11% cost of capital. What’s the NPV of the investment?
|
What is the present value of the depreciation tax savings
: A machine costs $4 million, has a three-year useful life, and has zero salvage value. Assume a discount rate of 14% and a 40% tax rate. Assuming the machine is depreciated on a straight-line basis, what is the present value of the depreciation tax sa..
|
Investment project will require an initial cash outlay
: Suppose a particular investment project will require an initial cash outlay of $946,000 and will generate a cash inflow of $454,000 in each of the next three years. What is the project’s IRR? Suppose a company’s hurdle rate is 18%, should it accept t..
|
Opportunity to purchase a more efficient weinie machine
: Wayne’s Weinie Works has found an opportunity to purchase a more efficient weinie machine. It is expected that the new machine will generate revenues of $32,000 and expenses of $12,000 per year during its 5 year life. It is also on a 5 year depreciat..
|
About the calculating investment returns
: You bought one of Rocky Mountain Manufacturing Co.’s 9 percent coupon bonds one year ago for $1,052.30. These bonds make annual payments and mature seven years from now. Suppose that you decide to sell your bonds today, when the required return on th..
|
What is the before tax of debt and cost of preferred stock
: Gizmo Inc has outstanding 10 year bonds with a 12% coupon rate, annual payments selling for $1,300. Its preferred stock is selling for $150 and pays a fixed dividend of $15. Gizmo Inc. common stock is selling for $200 and has a beta of 1. What is the..
|
Debt outstanding and a total market value
: RAK, Inc., has no debt outstanding and a total market value of $200,000. Earnings before interest and taxes, EBIT, are projected to be $30,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 18 percen..
|