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The XYZ Corporation is planning to purchase an extruder. The purchase price of the extruder $350,000. XYZ plans to make a down payment of 25% of the first cost of the extruder and to make a 7 year, 10%, yearly payment loan for the rest of the first cost of the extruder. XYZ believes that the extruder can be sold for $75,000 at the end of its 15 year service life. The new extruder will increase xYz's annual income by $90,000. Maintenance and operating costs expected to be $4,000 during the first year to increase by each year. XY7 uses a before-tax MARR of 12% preliminary economic studies. What is the before-tax present worth of the extruder to XYZ?
Assume a project has cash flows of -$51,300, $18,200, $37,300, and $14,300 for years 0 to 3, respectively. What is the profitability index given a required return of 12.5 percent?
Stock A has exhibited a standard deviation in stock returns of 0.5, whereas Stock B has exhibited a standard deviation of 0.6. The correlation coefficient between the stock returns is 0.5. What is the variance of a portfolio composed of 70 percent St..
The Island Hotel Company, Inc. just paid a dividend of $1.50 per share, and that dividend is expected to grow at a constant rate of 5.00% per year in the future. The company's beta is 1.95, the market risk premium is 6.25%, and the risk-free rate is ..
Bond value and time: Constant required returns Pecos Manufacturing has just issued a 15-year, 12% coupon interest rate, $1,000-par bond that pays interest annually. The required return is currently 14%, and the company is certain it will remain at 14..
Calculate the net present value, using straight-line depreciation for tax purposes. - Calculate the net present value, using the sum-of-the-years digits method of accelerated depreciation, for tax purposes.
Dave Co. owns aging machines and is considering buying new ones. Dave Co. is considering replacing their older machines to take advantage of the higher potential day rates for their contracts over the next five years. Assume that Dave Co. faces a 40%..
A firm earns 10 percent annually on its investments. One possible investment offers $50,000 a year for 10 years and costs $300,000. Should the firm make this investment?
What is the difference of WACC based on market value weights and book weights - Please show formulas.A balance sheet shows a total of noncallable $45 million.
You have just completed the first year of operation for your business and have the following information: sales, $200,000; cost of goods, $140,000; rent, $18,000; utilities, $8,400; insurance, $2,000; equipment, $3,500; and interest, $10,000. Using t..
Beta company is considering buying a widget fogger, It will cost $25000 to purchase and $5000 to install. It will be depreciated SACRS ( 20 % 40 % 15 % 15 % 10 % ) and will last four years before being sold as scrap for $3000. Beta s tax rate is 20 %..
We learn from Gorton’s book that banks in August 2007 went right to the Federal Reserve discount window to replace other sources of liquidity that were becoming scarcer. In addition managers of the bank made public announcements that they were using ..
One year treasury bills currently earn 5.35 percent. You expect that one year from now, one year treasury bill rates will increase to 5.50 percent. The liquidity premium on two-year securities is 170 percent. If the liquidity theory is correct, what ..
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