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A new piece of equipment costs $100,000 and another $20,000 to modify it for its special use by your firm. The machine falls into the MACRS 3-year class, so that over its 4-year life the applicable MACRS depreciation rates are 33.33%, 44.45%, 14.81% and 7.41%. The machine will be sold after 3 years for $40,000. The use of this new machine will increase net working capital (spare parts) by $10,000. The new machine will reduce annual before-tax operating costs by $35,000. The firm's tax rate is 40%.
A) What is the Year 0 cash flow?
B) What are the net operating cash flows in years 1, 2 and 3. (show work)
C) What is the additional (non-operating) cash flow in Year 3?
D) If the project's cost of capital is 10%, should the machine be purchased?
Dome Metals has credit sales of $126,000 yearly with credit terms of net 90 days, which is also the average collection period. What will the net gain or loss be to the firm if this discount is offered?
Suppose a 10-year, $1,000 bond with a 7% coupon rate and semi annual coupons is trading for a price of $1,195.23. What is the bond's yield to maturity (expressed as an APR with semi annual compounding.)? If the bonds yield to maturity changes to 9% A..
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What is cost of equity and how does it function in the cost of capital? To increase a firm’s value, results should show your WACC is moving in which direction? What are those skills?
Evaluate the net present value of a stream of income:
Killer Whale, Inc. has the following balance sheet statement items: current liabilities of $619,975; net fixed and other assets of $1,532,290; total assets of $3,477,630; and long term debt of $633,373. What is the amount of the firm's current assets..
Current sales are $360,000, current assets $80,000, accounts payable $15,000, accruals $5,000, net profit margin of 5% with a 50% dividend payout. If I expect sales to increase by 20% and no fixed assets are needed, what is my external funds requi..
a movie studio sells the latest movie on dvd to blockbuster at 10 per dvd. the marginal production cost for the movie
discuss the following topic should the reduced tax rate on dividends affect a multinational firms capital structure?a
Describe with a graph the payoff from the following portfolio: a long forward on some a set and a long put option on the same asset with the same maturity as the forward contract, and a strike price that is equal to the forward price at the time the ..
List the four types of businesses that investment banks traditionally engage in to sustain their operations. Describe the basic characteristics of each type by noting how the business might generate a profit. Then describe some of the basic risks wit..
Antonio's is analyzing a project with an initial cost of $38,000 and cash inflows of $25,000 a year for 2 years. This project is an extension of the firm's current operations and thus is equally as risky as the current firm. The firm uses only debt a..
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