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A firm is considering an investment in a new machine with a price of $18.15 million to replace its existing machine. The current machine has a book value of $6.15 million and a market value of $4.65 million. The new machine is expected to have a four-year life, and the old machine has four years left in which it can be used. If the firm replaces the old machine with the new machine, it expects to save $6.85 million in operating costs each year over the next four years. Both machines will have no salvage value in four years. If the firm purchases the new machine, it will also need an investment of $265,000 in net working capital. The required return on the investment is 12 percent, and the tax rate is 35 percent. Assume the company uses straight-line depreciation.
What is NPV of decision to purchase new machine?
What is the IRR of decision to purchase new machine?
What is NPV of decision to keep old machine?
What is IRR of decision to keep old machine?
Illustrate what would you expect to happen to the company's total revenue if the shoe prices were increased. What if the company lowers the price.
How can the high unemployment hurt the growth of the GDP. Is the U.S. economy primarily driven by consumers or businesses? Why? Let's look at the "crowding out effect". Please explain and define the crowding out effect,
A certain cell phone sells for 2400 yuan in China and for $300 in the U.S. The nominal exchange rate is 6.5 yuan per dollar. Find the real exchange rate. Show your work. In terms of dollars where is the cell phone cheaper?
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Elucidate how advertising can be employed to allow Tots-R-Us to keep cost above average cost with encouraging entry.
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Your mutual fund increased in value from $10 to $40 over the last 15 years. Illustrate what was the average annual return with continuous compounding for the mutual fund over the 15 year period.
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