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Quick Computing installed its previous generation of computer chip manufacturing equipment 3 years ago. Some of that older equipment will become unnecessary when the company goes into production of its new product. The obsolete equipment, which originally cost $39 million, has been depreciated straight-line over an assumed tax life of 5 years, but it can be sold now for $17.8 million. The firm’s tax rate is 30%. What is the after-tax cash flow from the sale of the equipment? (Enter your answer in millions rounded to 2 decimal places.)
After-tax cash flow $ _______ million
Ritz Furniture has a contribution margin ratio of 0.15. If fixed costs are $162,600, how many dollars of revenue must the company generate in order to reach the break-even point?
One of your customers is delinquent on his accounts payable balance. You’ve mutually agreed to a repayment schedule of $500 per month. You will charge 1.45 percent per month interest on the overdue balance. If the current balance is $13,500, how long..
ALUM, Inc. uses high-tech equipment to produce specialized aluminum products for its customers. Each one of these machines costs $1,520,000 to purchase plus an additional $48,000 a year to operate. The machines have a five-year life after which they ..
Using the DCF method, calculate the cost of equity. Using the SML method, calculate the cost of equity. The answers in [A] and [B] are very different. Why?
Precision Engineering recently announced that its next annual dividend will be $1.20 per share with later dividends increasing by 2.5 percent annually. What is the current value of this stock to you if you require a 12 percent rate of return?
TAB Inc. has a $1,000 (face value), 10 year bond issue selling for $1,184 that pays an annual coupon of 8.5 percent. What would be TAB's before-tax component cost of debt?
The Jackson–Timberlake Wardrobe Co. just paid a dividend of $1.10 per share on its stock. The dividends are expected to grow at a constant rate of 5 percent per year indefinitely. Investors require a return of 11 percent on the company's stock. What ..
Present Value with Different Discount Rates Compute the present value of $1,000 paid in three years using the following discount rates: 6 percent in the first year, 7 percent in the second year, and 8 percent in the third year.
The capital structure that maximizes expected EPS also maximizes the price per share of common stock. The capital structure that minimizes the interest rate on debt also maximizes the expected EPS. One defect of the IRR method vs. the NPV is that the..
You have $10,000 to invest and you are considering investing in a fund. The fund charges a front-end load of 5.75% and an annual expense fee of 1.25% of the average asset value over the year. You believe the fund's gross rate of return will be 11% pe..
Most organizations have or need to formulate a growth strategy. What are the different ways to do so? Provide specific examples of companies that have utilized these different ways.
Netscrape Communications does not currently pay a dividend. You expect the company to begin paying a $4.8 per share dividend in 14 years, and you expect dividends to grow perpetually at 6.3 percent per year thereafter. If the discount rate is 15 perc..
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