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In 2018 Bluegum Enterprise is considering the acquisition of a new cooling system for one of its plants. The system requires an initial outlay of $54,200 in Year 0 and have an expected life of five years. The cooling system is expected to reduce the firmâs overall costs by $20,608 at the end of each year over its five-year life. In addition to the $20,608 cash flow from operations during the fifth and final year, there will be an additional cash flow of $13,200 at the end of the fifth year associated with the salvage value of the system, making the cash flow in year 5 equal to $33,808.
Given a required return of 15%, calculate the following:
(a) Payback period
(b) Discounted payback period
(c) Net present value
(d) Profitability index
(e) Internal rate of return
(f) Should this project be accepted?
(g) If the required rate of return is 20%, should this project be accepted?
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carlson manufacturing has some equipment that needs to be rebuilt or replaced. the following information has been
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Compute the payback for both projects and choose better one. Compute net present value and recommend better project.
What general examples would you give to Senior Management to illustrate effective and ineffective hedging?
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Use MM's proposition 2 to calculate the new cost of equity.
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What situation would you use preferred and convertible instruments as investments in? Why?
You plan to analyze the value of a potential investment by calculating the sum of the present values of its expected cash flows. Which of the following would lower the calculated value of the investment?
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