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RealTurf is considering purchasing an automatic sprinkler system for its sod farm by borrowing the entire $20,000 purchase price. The loan would be repaid with four equal annual payments at an interest rate of 12%/year. It is anticipated that the sprinkler system would be used for 9 years and then sold for a salvage value of $500. Annual operating and maintenance expenses for the system over the 9-year life are estimated to be $7,000 per year. If the new system is purchased, cost savings of $10,000 per year will be realized over the present manual watering system. RealTurf uses a MARR of 15%/year for economic decision making.
Show the internal rate of return used to reach your decision:
Based on an internal rate of return analysis, is the purchase of the new sprinkler system economically attractive?
Write down expressions for the characteristic lines for securities A and B. Draw sketches of the characteristic lines for securities A and B. Explain briefly how you would interpret the characteristic lines.
MegaDebt Corp. just issued a dividend of $0.85. The firm pays quarterly dividends. The dividends are expected to grow at 0.2 percent each quarter. The shareholders ask for a return of 5.25 percent each year. What is the fair price of MegaDebt stock? ..
A firm has sales of $173,000, total assets of 160,000, net income of $15,000, and dividends paid of $3,000. What is the internal growth rate?
The proceeds of a 10,000 death benefit are left on deposit with an insurance company for seven years at an effective annual interest rate of 5%. The balance at the end of seven years is paid to the beneficiary in 120 equal monthly payments of X, with..
QRM, Inc.'s marginal tax rate is 35%. It can issue 10-year bonds with an annual coupon rate of 7% and a par value of $1,000. After $12 per bond flotation costs, new bonds will net the company $966 in proceeds. Determine the appropriate after-tax cost..
imagine that you are the entrepreneur who has created a successful new venture. the venture is posed to expand
Companies often try to keep accounting earnings growing at a relatively steady pace in an effort to avoid large swings in earnings from period to period. They also try to manage earnings targets.
You are offered $1000 (in nominal dollars) 6 years from now in exchange for a loan of $750 today. You expect inflation to run 3.3% per year, and your real hurdle rate is 5%. Should you make the loan? You have $1000 in an account that yields a nominal..
Micro Tech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Micro tech to begin paying dividends, beginning with a dividend of $1.25 coming 3 years from to..
process of performing financial analysis of a public companygeneral component---no more than one paragraph describing
Each year, Sunshine Motos surveys 7,500 former and prospective customers regarding satisfaction and brand awareness. For the current year, the company is considering outsourcing the survey to Global Associates, who have offered to conduct the survey ..
Compute the unit sales price at which Blake must sell its product in the current year in order to earn a budgeted target profit of £200,000 - Calculate a value in response Unhappy about the prospect of a price increase, Blake's sales manager wou..
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