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ACME Manufacturing is considering replacing an existing production line with a new line that has a greater output capacity and operates with less labor than the existing line. The new line would cost $1 million, have a five-year life, and be depreciated using MACRS over three years. At the end of five years, the new line could be sold as scrap for $150,000 (in year 5 dollars). Because the new line is more automated, it would require fewer operators, resulting in a savings of $40,000 per year before tax and unadjusted for inflation (in today's dollars). Additional sales with the new machine are expected to result in additional net cash inflows, before tax, of $110,000 per year (in today's dollars). If ACME invests in the new line, a one-time investment of $10,000 in additional working capital will be required. The tax rate is 35 percent, the opportunity cost of capital is 10 percent, and the annual rate of inflation is 4.90 percent. What is the NPV of the new production line?
Highland Cable Corporation is planning an expansion of its facilities. Highland Cable is currently financed with 50% debt and 50% equity common stock par value of $10.
In 250 to 350 words, describe foreign exchange risk and provide an example that examines how foreign exchange rates could cause a loss to the firm.
Supposing a 40% tax rate, compute the earnings per share data which should appear on the financial statements of Bio Industries as of December 31, 2010.
Explain the International Accounting Standards Board (IASB) and its purpose. What countries are subject to IASB? How is the IASB the same or different from FASB?
Texas Products Inc has a division which makes burlap bags for the citrus industry. The unit has operating fixed expenses of $12,000 per month, and it must sell 42,000 bags per month at $2.50 to break even.
selling general and administrative expenses totaled $1,416,400 for the year, and cost of goods sold was $10,963,600 for the year. Assuming a federal income tax rate of 34%, what was the Delta Ray Brands net income after-tax?
Calculate the NPV of going directly to market and the NPV of test marketing before going to market.
The LowTec Company is about to begin producing and selling its prototype product. Annual cash flows for the next five years are forcasted as:
Write down the advantages and limitations of financial management of future and present values of money, annuities, interest rates, uneven cash flow, and amortization?
Gold sells for $325 per ounce and copper sells for $0.89 per pound. Allocate the joint costs using relative weight. With these costs, what is the profit or loss associated with Kenneth Co.?
Chamberlain Canadian Imports has agreed to buy 15,000 cases of Canadian beer for four million Canadian dollars at today's spot rate. The firm's financial manager, James Churchill, has noted the following current spot and forward rates:
Austin Corporation bought 25 percent of the voting common stock of Gainsville Corporation, paying $2,000,000. Austin decided to use the equity method to account for this investment.
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