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A firm is considering an investment in a new machine with a price of $18.03 million to replace its existing machine. The current machine has a book value of $6.03 million and a market value of $4.53 million. The new machine is expected to have a four-year life, and the old machine has four years left in which it can be used. If the firm replaces the old machine with the new machine, it expects to save $6.73 million in operating costs each year over the next four years. Both machines will have no salvage value in four years. If the firm purchases the new machine, it will also need an investment of $253,000 in net working capital. The required return on the investment is 10 percent, and the tax rate is 38 percent. Assume the company uses straight-line depreciation. What is the NPV of the decision to purchase a new machine? What is the IRR of the decision to purchase a new machine? What is the NPV of the decision to keep the old machine? What is the IRR of the decision to keep the old machine?
Suppose you have budgeted $ 1175 a month towards a mortgage. If you are offered a 30 year mortgage at an interest rate of 7.5%, how expensive a home mortgage can you afford?
The contribution margin per unit is equal to the:
An increase in a firm's average collection period (average accounts receivable period) generally indicates that:
The Whole Foods Market, Inc. balance sheet for the fiscal year ending September 29, 2013 included the following: total current assets of $1,540 million, total assets of $4,320 million, total current liabilities of $849 million, and total liabilities ..
You’re trying to determine whether to expand your business by building a new manufacturing plant. The plant has an installation cost of $12.7 million, which will be depreciated straight-line to zero over its four-year life. If the plant has projected..
You deposit $2,300 into an account that pays 4% per year. Your plan is to withdraw this amount at the end of 5 years to use for a down payment on a new car. How much will you be able to withdraw at the end of 5 years? Round your answer to the nearest..
A ________ exchange rate is the quoted price for a unit of foreign currency to be delivered within a very short period of time. The Government does not set a _______ exchange rate, which means that supply and demand in the market determine the curren..
A company has 100 million shares outstanding trading for $8 per share. It also has $900 million in outstanding debt. If its equity cost of capital is 15%, and its debt cost of capital is 12%, and its effective corporate tax rate is 40%, what is its w..
For bond valuation, if the bond is currently trading at a discount, then the
Prestige Auto's records show net income of $30,00, depreciation expense of $10,000, and cash dividend paid of $5,000. Using the indirect method, determine the cash flow from operating activities on the cash flow statement.
You want to borrow $10,000 from your brother. He says if he charged you 7.2% that would be interest of $720 for the year. So in total you would pay him $10,720. So he tells you that you can pay $10,720/12 = $893.33 per month for 12 months that wou..
Six years ago, Bradford Community Hospital issued 20-year municipal bonds with a 7 percent annual coupon rate. The bonds were called today for a $70 call premium--that is, bondholders received $1,070 for each bond. What is the realized rate of return..
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