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Replacement Analysis. The Chen Company is considering the purchase of a new machine to replace an obsolete one. The machine being used for the operation has both a book value and a market value of zero; it is in good working order, however, and will last physically for at least another 10 years. The proposed replacement machine will perform the operation so much more efficiently that Chen's engineers estimate it will produce after-tax cash flows (labor savings and depreciation) of $9,000 per year. The new machine will cost $40,000 delivered and installed, and its economic life is estimated to be 10 years. It has zero salvage value. The firm's WACC is 10%, and its marginal tax rate is 35%. Should Chen buy the new machine?
Old Time Savings Bank pays 4% interest on its savings accounts. If you deposit $1,000 in the bank and leave it there, how much interest will you earn in 1st year?
1.Describe the difference between absolute and relative valuation. 2. Describe the basic characteristics of alternative investments 3. If the coupon rate on XYZ is 6%, annual yield to maturity is 10%, is the bond trading at par, premium or discoun..
The pure rate of interest is 3%,investors demand a 5% inflation premium on long-term investments, and risk premium for a stok with beta of 1 is 7%.ZZZ stock has a beta of 1.35
You are in the role of a chief operating officer for a for-profit insurance company. A board of directors has requested that you prepare a summary of the issues involved in a potential reduction in U. S. medical insurance reimbursement of 40%...
Cull Incorporated recently borrowed $250,000 from Century Bank when the prime rate was 4%. The loan was for 90 days with interest to be paid at the end of the period with a rate fixed at 1.5% above the prime rate.
A 5.85 percent coupon bond with 18 years left to maturity is offered for sale at $1,055.25. What yield to maturity is the bond offering? (Assume interest payments are semiannual.)
Daily marginal tax rate is 35%. You are forecasting incremental free cash flows for Daily enterprises. What are the incremental free cash flow associated with the new machine?
1. How do you think each of the following items would affect a company's ability to attract new capital and the flotation costs involved in doing so?
You charged $1,000 on your credit card for Christmas presents. Your credit card firm charges you 16 percent yearly interest, compounded monthly.
A bond is selling at a premium of $300, pays a coupon of 10% and the ttm is 5 years. What is the market yield?
If the stock price increases 14 percent on the first day of trading, what will be the total cost of issuing the securities?
Suppose that the U.S and Euro nominal interest rate are equal. Subsequently, the U.S. nominal rate decreases while Euro nominal interest rate remains stable.
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