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A firm considers building a new and improved production facility for one of its existing products. It would be built on a piece of vacant land that the firm owns. This land was acquired four years ago at a cost of $200,000; it has a current market value of $1,000,000. The building can be erected for $350,000. Machinery worth $150,000 needs to be bought. Capital cost allowances on a declining balance will be taken on all depreciable assets at a rate of 20 percent. Operating savings from the new production facility are expected to be $300,000 per year for the next 10 years. The salvage value at the end of the 10 years is expected to be $1,500,000, which is solely the value of the land. The firms tax rate is 40 percent, and the firms discount rate is.
Question: Based on a discounted cash-flow analysis, should the investment to be undertaken?
The machine falls into the MACRS 5-year class life category. Assume a tax rate of 30% and a discount rate of 13%. What is the depreciation tax shield for this project in year 5?
You purchase a bond with a coupon rate of 9.3 percent and a clean price of $945. If the next semiannual coupon payment is due in two months, what is the invoice price?
Harris intends to maintain its 55% debt and 45% common equity capital structure, and its net income is expected to be $9,687,000. If Harris maintains its residual dividend policy (with all distributions in the form of dividends).
Find out the expected stream of dividends per share for investor who plans to retain his shares rather than sell them back to the company? Check your estimate of share vaue by discounting this stream of dividends per share.
A company had a year end 2004 retained earnings balance of $220,000. The company reported net profits after taxes of $50,000 in 2005 & paid dividends in 2005 of $30,000.
The risk-free rate is 8 percent. a. What discount rate should be used to discount the estimated cash flow? (Hint: Use Columbia's cost of equity to determine the market risk premium.) b. What is the dollar value of HCA to Columbia's shareholders?
Management is considering issuing $120,000 of debt at an interest rate of 9 percent and using the proceeds on a stock repurchase. Ignore taxes. How many shares will the firm repurchase if it issues the debt securities?
Deer Valley Lodge, a ski resort in the Wasatch Mountains of Utah, has plans to eventually add 5 new chairlifts. Suppose that one lift costs $2 million, and creating the slope and installing the lift costs another $1.3 million.
What is the time value of money, and how does it apply to this condition? What is weighted average cost of capital, and how does it impact decision to expand your division? What is marginal cost of capital, and how does it impact decision to expand y..
Merger activity continues to be a much-used strategic option. From 2008 to 2009, M&A activity completed totaled approximately $5 trillion.
Outstanding bonds have a $1,000 par value and will mature in 5 years, yield to maturity is 9%-Find out the bonds's annual interest rate?
Once the patent expires, other pharmaeutical companies will be able to produce the same drug and competiton will likely drive profits to zero. What is the present value of the new drug if the interest rate is 10% per year?
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