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You must evaluate a proposed spectrometer for the R&D department. The base price is $170,000, and it would cost another $42,500 to modify the equipment for special use by the firm. The equipment falls into the MACRS 3-year class and would be sold after 3 years for $68,000. The applicable depreciation rates are 33%, 45%, 15%, and 7%. The equipment would require an $11,000 increase in net operating working capital (spare parts inventory). The project would have no effect on revenues, but it should save the firm $59,000 per year in before-tax labor costs. The firm's marginal federal-plus-state tax rate is 40%. >>>>>>>>What is the initial investment outlay for the spectrometer, that is, what is the Year 0 project cash flow? (Round your answer to the nearest cent.)
For those Assignments in this course that require you to perform calculations you must: Create an Excel spreadsheet containing the information provided. Template in Word is provided. Show all your work.
Your firm, Martin Industries, has experienced a higher than expected demand for its product line. The firm plans to expand its operation by 25% by spending $5,000,000 for an additional building.
calculate the firm's tax liability for the year. What are the firm's average and marginal tax rates?
What is the average collection period (AKA Days Sales Outstanding)? How is it computed? Why is it significant to firm?
General Mills, Corporation, the large manufacturer of packaged foods, reported the following in its annual report for year ending May 25, 2008;
The relevant tax rate is 30 percent. What is the after tax cash flow from the sale of this asset?
You just found your dream car. The car will cost you $36,800. The dealer will lend you the entire amount at 3.9 percent interest, compounded monthly, for 48 months. What is the amount of the monthly payment?
Why would a preferred stockholder want the stock to have a cumulative dividend feature and protective provisions?
Conseco's preferred stock pays an annual dividend of $0.75/sh, and is selling at $8.85 a share. Use your knowledge of discounting to estimate Conseco's cost of preferred stock financing.
The shareholders if XYZ Company has voted in favor of a buyout offer from ABC Corporation. Information about each firm is given here:
The Tapley Corporation is trying to determine an acceptable growth rate in sales. While the company wants to increase, it does not want to use any external funds to support such expansion due to the particularly high interest rates in market now.
What will be the value of the equity if the firm repurchases all of its debt and raises the funds to do this by issuing equity? Assume that all of the assumptions in Modigliani and Miller's Proposition 1 hold.
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