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A proposed cost-saving device has an installed cost of $658,000. The device will be used in a five-year project but is classified as three-year MACRS (MACRS Table) property for tax purposes. The required initial net working capital investment is $50,500, the marginal tax rate is 30 percent, and the project discount rate is 15 percent. The device has an estimated Year 5 salvage value of $75,500.
What level of pretax cost savings do we require for this project to be profitable? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g.,32.16.)
Pretax savings $
Do US Treasury bills have lower interest rates than large-denomination negotiable bank CD? Why or why not, is the difference appropriate, and do you think that it correctly reflect the risk of the instrument with the "higher" interest rate.
Assume the U.S. interest rate is 7.5%, the New Zealand interest rate is 6.5%, the spot rate of the NZ$ is $.52, and the one year forward rate of the NZ$ is $.50. At the end of the year, the spot rate is $.48. Based on this information, what is the ef..
You purchase 100 shares of stock for $25 a share. The stock pays a $1 per share dividend at year-end. What is the rate of return on your investment for the end-of-year stock prices listed below? What is your real (inflation-adjusted) rate of return? ..
Find the net payment on an equity swap in which party A pays the return on a stock index and party B pays a fixed rate of 6 percent. The notional amount is $10 million. The stock index starts off at 1,000 and is at 1,055.15 at the end of the period. ..
MegaDebt Corp. just issued a dividend of $0.85. The firm pays quarterly dividends. The dividends are expected to grow at 0.2 percent each quarter. The shareholders ask for a return of 5.25 percent each year. What is the fair price of MegaDebt stock? ..
You are considering an asset allocation that will consist of 10 percent in the money market account, 40 percent in the Small-Stock Fund, which has a beta of 1.40 and 60 percent in the S&P/TSX index fund, which has a beta of 1.0. What is the beta of y..
A car dealer will sell you the $16,450 car of your dreams for $4,329 down and payments of $339.97 per month for 48 months. Please provide the following information: a) amount to be paid b) amount of interest c) interest rate d) APR (rounded to the ne..
The following estimates have been prepared for a project: Fixed costs: $36,000 Depreciation: $24,000 Sales price per unit: $4 Accounting break-even: 40,000 units What must be the variable cost per unit?
You are analyzing the after-tax cost of debt for a firm. You know that the firm’s 12-year maturity, 9.10 percent semi-annual coupon bonds are selling at a price of $767.17. These bonds are the only debt outstanding for the firm. What is the current Y..
Quantitative Problem: Bank 1 lends funds at a nominal rate of 8% with payments to be made semi-annually. Bank 2 requires payments to be made quarterly. If Bank 2 would like to charge the same effective annual rate as Bank 1, what nominal annual rate ..
You are considering buying a house for $200,000. You have $40,000 in your bank account which pays 1% APR compounded monthly. If you contribute 10% of the price of the house as a down payment, the terms of your mortgage will be an original balance of ..
Identify what the expected return of stock should be for each of the following scenarios. Assume that risk free is 8% and expected return of market is 10%:
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