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Salevsky Manufacturing Company is considering the purchase of a new machine for $250,000 that will reduce manufacturing costs by $90,000 annually. Salevsky will use the 3-year MACRS accelerated method to depreciate the machine, and it expects to sell the machine at the end of its 5-year operating life for $23,000. The applicable depreciation rates are 33 percent, 45 percent, 15 percent, and 7 percent (yes, there are four years here–that’s the way it works). The firm will need to increase net operating working capital by $25,000 when the machine is installed, but required operating working capital will return to the original level when the machine is sold in 5 years. Salevsky’s marginal tax rate is 40 percent, and it uses a 10 percent cost of capital to evaluate projects of this nature. What is the project’s NPV? What is its IRR?
A company’s stock is currently worth $50.00 per share based on a recent quarterly dividend of $0.99 per share, expected quarterly growth of 1%, and a required rate of return of 12% compounded quarterly. However, new information has cast serious doubt..
Portfolio Expected Return. You own a portfolio that is 20 percent invested in Stock X, 45 percent in Stock Y, and 35 percent in Stock Z. The expected returns on these three stocks are 10 percent, 14 percent, and 16 percent, respectively. What is the ..
FD Corp. pays a constant $12 dividends on tis stock for the next 9 years, then will cease paying dividends forever. If investors require 10% return on this stock, what is the current value of the stock?
Future Value of a Single Payment. If you deposit $6,000 in a bank account that pays 8.3% interest annually, how much would be in your account after 5 years? Round your answer to the nearest cent.
The Division of the Culver Company, a profitable, diversified manufacturing firm, purchased a machine five years ago at a cost of $10,000. The machine had an expected life of 10 years at time of purchase and a zero estimated salvage value at the end..
Investment Return MedTech Corp stock was $51.80 per share at the end of last year. Since then, it paid a $1.30 per share dividend. The stock price is currently $63.35. If you owned 300 shares of MedTech, what was your percent return?
Suppose a particular investment project will require an initial cash outlay of $1,069,000 and will generate a cash inflow of $457,000 in each of the next three years. What is the project’s IRR? Suppose a company’s hurdle rate is 18%, should it accept..
If the cost of new common equity is higher than the cost of internal equity, why would a firm choose to issue new common stock? Calculate all MCC break points for the following information: What determines whether to use the dividend growth model app..
Kolby Corp. is comparing two different capital structures. Plan I would result in 15,000 shares of stock and $100,000 in debt. Plan II would result in 11,500 shares of stock and $170,000 in debt. what are the break-even levels of EBIT for each plan a..
While marginal and average tax rates often differ, it is the marginal tax rate that is relevant for most financial decisions. Book value is an accounting summary of value and is inferior to market value as a source of current information regarding th..
Consider the following projects, X and Y where the firm can only choose one. Project X costs $600 and has cash flows of $400 in each of the next 2 years. Project Y also costs $600, and generates cash flows of $500 and $275 for the next 2 years, respe..
What are some of the first examples of emergency management?- What is the significance of the Flood Control Act of 1934?
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