The new machine will have a zero rate of return

Assignment Help Financial Management

Reference no: EM132007363

Dexter Smith & Co. is replacing a machine simply because it has worn out. The new machine will not affect either sale or operating cost and will not have any salvage value at the end of its five year life. The firm has a 34 percent tax rate, uses straight line depreciation over an asset life, and has a positive net income. Given this, which one of the following statements is correct?

As a project, the new machine has a net present value equal to minus one times the machines purchase price.

The new machine will have a zero rate of return.

The new machine will generate positive operating cash flow.

The new machine will create a cash outflow when the firm disposes of it at the end of its life.

The new machine creates erosion effects.

Reference no: EM132007363

Questions Cloud

Compute the price for each bond : Compute the price for each bond. The current market interest rate for the bonds is 8%.

What you have learned from threaded discussion : What you have learned from Threaded Discussion

Present value of perpetual stream of annual cash flow : What is the present value of perpetual stream of annual cash flow with the cash flow of $125 to be received in one year

What is the total cash flow in year nine of the project : What is the Total Cash Flow in Year 9 of the project if the equipment can be sold for $6,825 and the tax rate is 30%?

The new machine will have a zero rate of return : As a project, the new machine has a net present value equal to minus one times the machines purchase price. The new machine will have a zero rate of return.

What is the yield to maturity if interest is paid once year : What is the current yield on the bond? What is the yield to maturity if interest is paid once a year?

Accepting policies that are dictated by their competitors : To what extent can firms set their own credit policies as opposed to accepting policies that are dictated by their competitors?

What is the present value of the bond : Suppose a bond with a face value of $1000 is discounted to the present at 10%, what is the present value of the bond in 30 years if market rate is 5 %?

Stock to the systematic and firm-specific components : Break down the variance of each stock to the systematic and firm-specific components.

User Account

All Pages