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EL Company plans to acquire equipment, with a 3-year MACRS life, at a cost of $65,000 and an extra $7,500 for delivery and installation included. EI Company expects that the new equipment will help boost its revenue by $40,000 annually for next 4 years and the operating cost is expected to increase by $15,000 each year. At the end of year 4, Anderson expects to sell the equipment for $15,000 (salvage value). The applicable depreciation rates are 33%, 45%, 15%, and 7% . The net working capital would increase by $12,000 initially, but would be recovered at the end of the project's 4-year life. EL Company's marginal tax rate is 35% and WACC is 11.5%.
A. What is the depreciable cost basis?B. Find the total cash outflow for the project.C. What are the operating cash flows for year 1 through 4?D. What is the book value of the machine at the end of the project?E. What is terminal value of the project?F. Find the free cash flows of the projectG. Find NPV.H. Find IRR.I. Should you take the project? Why or why not? Explain fully.
The capital structure of Ricketti Enterprises, Corporation, consists of ten million shares of common stock and 1 million warrants. Each warrant gives its owner the right to purchase one share of common stock for an exercise price of $15.
A court settlement awarded an accident victim four payments of $50,000 to be paid at the end of each of the next four years. Using a discount rate of 4%, calculate the present value of the annuity.
Prepare a paper comparing and contrasting debt and equity financing. In your paper, discuss the following questions:
Describe the different types of interests and IRS rule related to the capability to deduct each type for tax purposes. Describe the section of IRS code that the IRS will employ to support its position of disallowing the deduction.
What is the yield on a 10-year corporate bond that has the same default risk and liquidity premiums as the 5-year corporate bond? Disregard cross-product terms, i.e., if averaging is required, use the arithmetic average.
If the stock sells for $60 per share, what is your best estimate of CDB's cost of equity?
Jean Splicing will receive $50,000 in 50 years or $2,000 today. If long-term rates are 7 percent, what choice would you recommend? Find out the current value of the future payments
Computation of the bond coupon and current yield and yield to maturity and what annual dollar coupon amount will investors receive
Carefully describe what is meant by the term efficient market. Art there different levels of market efficiency discuss those levels?
On December 31, Beth Klemkosky bought a yacht for $50,000, paying $10,000 down and agreeing to paythe balance in 10 equal end of year installments and 10 percent interest on the declining balance. How big would the annual payments be?
DESCRIBE HOW A CHECK DRAWN ON A COMMERCIAL BANK IN NEW YORK CITY BUT DEPOSITED FOR COLLECTION IN ANOTHER BANK IN A DISTANT CITY SUCH AS SAN FRANCISCO MIGHT BE CLEARED THROUGH THE FACILITIES OF THE FEDERAL RESERVE SYSTEM.
The Costaguanan stock market provided a rate of return of 95%. The inflation rate in Costaguana during the year was 80%. In the United States, in contrast, the stock market return was only 12%, but the inflation rate was only 2%.
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