What is real rate of return for machine

Assignment Help Financial Management

Reference no: EM131937452

A corporation is considering purchasing a vertical drill machine. The machine will cost $61,000 and will have a 2-year service life. The selling price of the machine at the end of 2 years is expected to be $38,000 in today's dollars. The machine will generate annual revenues of $46,000 (today's dollars), but the company expects to have annual expenses (excluding depreciation) of $6900 (today's dollars). The asset is classified as a 7-year MACRS property. The tax rate for the firm is 41%. The general inflation rate is 3% and will impact the annual revenue, annual expenses, and salvage value. What is the real (inflation-free) rate of return for this machine? Express your answer as a percentage between 0 and 100.

Reference no: EM131937452

Questions Cloud

Risk-free rate of interest and market risk premium : The stocks beta is 1.7, the risk-free rate of interest is 2.5% and the market risk premium is 5.25%. Should you buy the stock?

Enter the annual equivalent worth of machine : Enter the annual equivalent worth of the machine that is the best alternative if the interest rate is 8.5%. If neither machine is acceptable, enter 0.

Discuss the problem of risky portfolio : Assume that you manage a risky portfolio with an expected rate of return of 19% and a standard deviation of 34%. The T-bill rate is 8%.

Write a discussion paper on project management : Conduct a search of Liberty University's Online Library resources to find 3 peer-reviewed articles that are no more than 3 years old and closely.

What is real rate of return for machine : The general inflation rate is 3% and will impact the annual revenue, annual expenses and salvage value. What is the real rate of return for machine?

What are financial securities : What do we call the price that a borrower must pay for debt capital? What is the price of equity capital? What are the four most fundamental factors.

Explain the some of the ethical issues that nike is facing : From Nike's standpoint, is this a fair assessment of their ethical standards? Explain the some of the ethical issues that Nike is facing in the case.

Discuss the use of javascript in the context of html : Discuss the use of JavaScript in the context of HTML. Based on CAT 1, style the output of your CAT 1 as much as possible using external CSS only.

Spent on purchasing the new technology : What is the maximum amount that should be spent on purchasing the new technology?"

User Account

All Pages