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Your company is considering a replacement of an old delivery van with a new one that is more efficient. The old van cost $40,000 when it was purchased 5 years ago. The old van is being depreciated using the simplified straight line method over a useful life of 8 years. The old van could be sold today for $7,000. The new van has an invoice price of $80,000, and it will cost $6,000 to modify the van to carry the company products. Cost savings from use of the new van are expected to be $ 28,000 per year for 5 years. At which time the van will be sold for its estimated salvage value of $18,000. The new van will be depreciated using the simplified straight line method over its 5 year useful life. The company's tax rate is 35%. Working capital is expected to increase by $5,000 at the inception of the project, but this amount will be recaptured at the end of year five.1) What is the initial outlay required to fund this replacement project ? choices: A)73,580, B)78,600, c)81,200, D)74,500. 2)what is the incremental free cash flow for year one? A)22,305 B)18,875 C)24,220 D)19,985 Please provide explanation for your answers.
What would the approximate price of a stock be if an average investor requires a return of 14% for an average stock, junk bonds are yielding 22% and 3 month T-Bills are yielding just 4.5%.
A firm is considering the purchase of an asset whose risk is greater than the current risk of the firm, based on any method for assessing risk. In evaluating this asset, the decision maker should
Describe Forecasting of net income using EBIT-EPS analysis and what will be the forecast for Robert's year-end net income
ourteen years ago, the U.S. Aluminum Corporation borrowed $9.9 million. To sustain the original $9.9 million purchasing power, how much must the lender be repaid? (Hint: Multiply the loan amount by one plus cumulative inflation).
Assume the equipment is depreciated on a straight-line basis over the project's life. What is the accounting break-even level for the project? What is the financial break-even level for the project?
company x is expected to pay an year-end dividend of $8 a share on its common stock. after the dividend payment the stock is expected to sell at $100 per share. the required rate of return on the common stock is 20%. then, calculate the current pr..
An investment is available that pays a tax-free 5%. The corporate tax rate is 25%. Ignoring risk, what is the pre-tax return on taxable bonds?
Larry Davis borrows $80,000 at 14 percent interest toward the purchase of a home. His mortgage is for twenty-five years.
What is the net interest income earned in dollars on this one-year transaction if the spot rate of U.S. dollars for Australian dollars and U.S. dollars for BPs at the end of the year are 0.588 and 1.848, respectively?
can you explain why the figure change?if the interest rate doubles, would you expect the mortagage payment to double?
The Maybe Pay Life Insurance Co. is trying to sell you an investment policy that will pay you and your heirs $28,000 per year forever. If the required return on this investment is 5.80 percent, how much will you pay for the policy?
Explain the time value of money using this scenario as an example.
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