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?

## What are the projects cash flows at year one and year twoDayman Inc. has asked you to evaluate a proposal to buy a new costume machine. The base price is $110,000, and shipping and installation costs would add another $15,000. The machine falls into the MACRS 3-year class, and it would be sold after anothe.. |

## Bonus points problem[Bonus Points Problem] In 40 years, you would like to retire on $150,000 a year in today's dollars. If the inflation rate = 4% a year for the next 40 years, how much must you have to equal today's $150,000? |

## How much money can be withdrawn each yearHow much money can be withdrawn each year over a 10 year period from an account that $100,000 in it, if the account earns 6% interest copounded annually. Assume there is no money left in the account after the 10th withdrawal. |

## Calculate the current priceCalculate the current price of a $1,000 par value bond that has a coupon rate of 11 percent, pays coupon interest semi-annually, has 21 years remaining to maturity, and has a current yield to maturity (discount rate) of 21 percent. |

## Present value of investment under period of rising inflationYou are interested in an investment project that costs $10,500 initially. The investment has a 5- year horizon and promises future end-of-year cash inflows of $5,000, $4,000, $2,500, $3,500 and $2,000 respectively. Your current cost of capital is 8% .. |

## Calculate the payback period and profitability indexCalculate the payback period, profitability index, net present value, and internal rate of return for the new strip mine. |

## What was the price of the company stock stock splitABC Communications recently completed a 5-for-3 stock split. Prior to the split, its stock price was $70 per share. The firm's total market value increased by 20% as a result of the split. What was the price of the company’s stock following the stock.. |

## Whats wrong with using payback periodHow can options sell for more than their exercise value and whats wrong with using payback period? What should we use instead? Why? |

## What is a leveraged buyout and what is mezzanine financingWhat is a leveraged buyout? What is mezzanine financing? What is a tax-free merger? Explain the difference between the economic and financial definitions of business failure. |

## Explain the provision for bad debtsHow does this income statement differ from the one presented in exhibit 3.1? - did the best care spend 367,000 on new fixed assets during fiscal year 2011?? |

## Value of portfolio after that change1) Calculate the value of your portfolio. 2) Calculate the D, G, W and k of your portfolio. 3) If the price goes up by $2 suddenly, what is the value of your portfolio after that change? |

## About the calculate the net present valueThe Spartan Technology Company has a proposed contract with the Digital Systems Company of Michigan. The initial investment in land and equipment will be $260,000. Of this amount, $210,000 is subject to five-year MACRS depreciation. Calculate the net.. |

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