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Monhegan Computers is considering whether to begin offering customers the option to have their old personal computers recycled when they purchase new systems. The recycling system would require Monhegan to invest $580,000 in the grinders and magnets used in the recycling process (that is at t=0). The company estimates that for each system it recycles, it would generate $1.50 in incremental revenues from the sale of scrap metal and plastics. The recycled computers will cost the firm nothing, but it will cost the firm $0.20 per unit to dispose of the toxic elements from the recycled computer. The firm expects to use the recycling equipment for five years, and at t=5 sell the recycling equipment for $20,000. The machinery will be depreciated at the five-year MACRS depreciation schedule. (The MACRS depreciation schedule for a five year life is: year 1-20%, year 2-32%, year 3-19.2%, year 4-11.52%, year 5-11.52%, year 6-5.76%. Note that a five year life lasts 6 years because of the half year convention for the first year, but the machinery is sold at t=5.) During the life of the machine no new capital expenditures or investments in working capital will be required. Monhegan estimates that in the first year of the recycling project, it could recycle 110,000 PCs and that this number will grow by 25% per year over the remaining four-year life of the recycling equipment. Monhegan uses a 18% discount rate to analyze capital expenditures and pays taxes equal to 30%. You must calculate the PFCFs. What is the project's NPV?
Lithium Inc. is considering two mutually exclusive projects, A and B. Project A costs $95,000 and is expected to generate $65,000in year one and $75,000 in year two. Project B costs 120,000 and is expected to generate $64,000 in year one, $67,000 in ..
OMG Inc. has 6 million shares of common stock outstanding, 5 million shares of preferred stock outstanding, and 7,000 bonds. Suppose the common shares are selling for $17 per share, the preferred shares are selling for $26 per share, and the bonds ar..
No law prohibits citizens in a state that does not sponsor a state-operated lottery from purchasing lottery tickets in a state that does have such a lottery. Georgia did not have a state-operated lottery, so John and several other Georgia residents a..
question 1 the following are the financial statements for hugo boss group for the financial years ending 2012 and
A small, private college is starting a scholarship fund. The college’s fund managers expect the investments in the fund will earn an average annual return of 8%. After those 20 years have passed, how much in scholarship money can the college pay out ..
Evaluate and discuss whether Boeing could benefit by using Activity Based Costing (ABC). The discussion should include what factor(s) influenced your decision, the ramifications of implementing ABC in the international business environment, and how y..
The 9 year $1,000 par bonds of Vail Inc pay 8 percent interest. The market's required yield to maturity on a comparable -risk bond is 11 percent. The current market price for the bond is $910. (a) Determine the yield to maturity; (b) What is the valu..
Cash presents unique risks and internal control issues due to the high liquidity and high volume of transactions. We all make purchases at retail outlets, probably several times each week. Discuss both the risks presented in processing your transacti..
An investment offers a total return of 12 percent over the coming year. Bill Bernanke thinks the total real return on this investment will be only 8.8 percent. What does Bill believe the inflation rate will be over the next year?
When advising a non- profit firm about a capital stricture approach, discuss which approach is more relevant- a. optimal capital structure (static-trade-off approach); or b. pecking order approach. in your response, briefly define each approach and i..
Thames Inc.'s most recent dividend was @2.20 per share (i.e., D0=$2.20). The dividend and stock price ae expected to grow at a rate of 5% per year. The stock price is currently $44? What is the required return on equity (r) if flotation costs are 10%..
Suppose there is 9-month forward premium for natural gas of 10% i.e. the forward price is 10% higher than the spot price. The risk-free rate 6% and the storage cost is paid continuously at 8%. What is the convenience yield for 9-month natural gas con..
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