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"Holliday Manufacturing is considering the replacement of an existing machine. The new machine costs $1.2 million and requires instillation costs of $150,000. The existing machine can be sold currently for $185,000 before taxes. It is two years old, cost $800,000 new, and has a $384,000 book value and a remaining useful life of 5 years. It was being depreciated under MACRS using a 5 year recovery period and therefore has the final 4 years of depreciation remaining. If it is held for 5 more years, the machine's market value at the end of year 5 will be $0. Over its 5 year life, the new machine should reduce operating costs by $350,000 per year. The new machine will be depreciated under MACRS using a 5 year recovery periods. The new machine can be sold for #200,000 net of removal and cleanup costs at the end of 5 years. An increased investment in net working capital of $25,000 will be needed to support operations if the new machine is acquired. Assume that the firm has adequate operating income against which to deduct any loss experienced on the sale of the existing machine. The firm has a 9% cost capital and is subject to a 40% tax rate. a. Develop the relevant cash flows needed to analyze the proposed replacement. b. Determine the net present value (NPV) of the proposal. c. Determine the internal of return (IRR) of the proposal. d. Make a recommendation to accept or reject the replacement proposal, and justify your answer. e. What is the highest cost of capital that the firm could have and still accept the proposal? Explain.
An unincorporated business owned by one individual and the owner benefits from the limited liability for business which limits his losses to what he has invested in the company.
Johnny's Pizza shop has sales of $531,000 and costs of $358,000. The profit margin is 4.8 % and teh accounts payable period is 41 days. What is the average accounts payable balance?
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lamar inc. just sold bonds each with 50 warrants attached. the bonds have a 20-year maturity and an annual coupon of
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Harold Hawkins bought a home for $320,000. He made a down payment of $45,000; the balance will be paid off over 30 years at a 6.775% rate of interest. How much will Harold's monthly payments be? Round off to the nearest $1.
Explain how the money markets play a role in this relationship between the interest rates and the level of net working capital.
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what is a convertible bond? how does the convertibility feature affect the bonds price and interest
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Market value weight of equity ?
What is the cross-exchange rate between the yen and the shekel; that is, how many yen would you receive for every shekel exchanged? Round your answer to two decimal places.
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