What is the equivalent annual savings

Assignment Help Financial Management
Reference no: EM131523922

Gluon Inc. is considering the purchase of a new high pressure glueball. It can purchase the glueball for $50,000 and sell its old low-pressure glueball, which is fully depreciated, for $8,000. The new equipment has a 10-year useful life and will save $12,000 a year in expenses. The opportunity cost of capital is 10%, and the firm’s tax rate is 40%. What is the equivalent annual savings from the purchase if Gluon uses straight-line depreciation? Assume the new machine will have no salvage value.

Reference no: EM131523922

Questions Cloud

Determine the most economical equipment life : Determine the most economical equipment life to minimize the EUAC (Equivalent Uniform Annual Cost).
Find the hedge ratio for put option : Find the hedge ratio for a put option
Outstanding professional reputation to perform the operation : Margo would like a different surgeon with an outstanding professional reputation to perform the operation.
What is current value of these bank bills : If the current 90-day bill rate is 7.2% p.a., what is the current value of these bank bills?
What is the equivalent annual savings : What is the equivalent annual savings from the purchase if Gluon uses straight-line depreciation?
What is the value of a share of GRF : If GRF just paid a $5.00 dividend and the appropriate discount rate is 15.4 percent, then what is the value of a share of GRF?
If bond is currently trading at its face value : If a bond is currently trading at its face (par) value, then it must be the case that:
What is the cash price of the bonds to the nearest dollar : what is the cash price of the bonds to the nearest dollar?
Maximum annual lease payment wolfson would be willing to pay : What is the maximum annual lease payment Wolfson would be willing to pay?. What is the NAL of leasing for Wolfson?

Reviews

Write a Review

Financial Management Questions & Answers

  What is standard deviation of these returns

What is the standard deviation of these returns?

  The underlying makes no cash payments

The spot price is $30, the annual risk-free rate is 4 percent, and the underlying makes no cash payments

  What is meant by business risk and financial risk

Dream Corp is comparing two different capital structures: an all equity plan (Plan A) and a lev ered plan (Plan B). Under Plan A the company would have 160,000 shares of stock outstanding. What is meant by business risk and financial risk? Explain th..

  What is the horizon or terminal value

Hart Enterprises recently paid a dividend, D0, of $3.25. It expects to have nonconstant growth of 15% for 2 years followed by a constant rate of 5% thereafter. The firm's required return is 19%. What is the horizon or terminal value?

  Identify an arch model for the data

Is there any evidence of serial correlations in the log returns? - Identify an ARCH model for the data and fit the identified model. Write down the fitted model.

  Twenty years ago with an insurance company

Ben invested $5,000 twenty years ago with an insurance company that has paid him 5 percent simple interest on his funds. Charles invested $5,000 twenty years ago in a fund that has paid him 5 percent interest, compounded annually. How much more inter..

  What was the net profit on the call option

XYZ sold a call option on Canadian dollars for $.01 per unit. The strike price was $.76, and the spot rate at the time the option was exercised was $.82. Assume XYZ did not obtain Canadian dollars until the option was exercised. Also assume that ther..

  Deduction for social security and medicare taxes

What will be the total deduction for social security and Medicare taxes on Rony's next semi monthly pay check of $3,960, if she has already earned $42,560 this year? (Social security tax is 6.2% of gross wages up to $106,800. Medicare tax is 1.45% of..

  Invested in each to maximize annual interest

A pension fund manager decides to invest a total of at most $45 million in U.S. Treasury bonds paying 5% annual interest and in mutual funds paying 7% annual interest. He plans to invest at least ?$5 million in bonds and at least ?$10 million in mutu..

  Hr department representatives

1. From your experiences working with and/or around HR department representatives are they performing as they should be and focusing on the right things? 2. What are some examples of activities where HR is a strategic partner with its organization?

  What profit do you actually expect

The Woods Co. and the Mickelson Co. have both announced IPOs at $72 per share. What profit do you actually expect?

  Use the capital-asset pricing model to predict return

Use the capital-asset pricing model to predict the return next year of a stock with a beta of 1.0, if you expect the return to holding stocks to be 8 percent on average, and the interest rate on three-month T-bills will be 3 percent. What is the expe..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd