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PDF Corp. needs to replace an old lathe with a new, more efficient model. The old lathe was purchased for $50,000 nine years ago and has a current book value of $5,000. (The old machine is being depreciated on a straight-line basis over a ten-year useful life.) The new lathe costs $100,000. It will cost the company $10,000 to get the new lathe to the factory and get it installed. The old machine will be sold as scrap metal for $2,000. The new machine is also being depreciated on a straight-line basis over ten years. Sales are expected to increase by $8,000 per year while operating expenses are expected to decrease by $12,000 per year. PDF's marginal tax rate is 40%. additional working capital of $3,000 is required to maintain the new machine and higher sales lever. The new lathe is expected to be sold for $5,000 at the end of the project's ten-year life. What is the project's terminal cash flow?
Suppose you are considering investing in either of two AAA corporate bonds. One will provide you with an annual 8% coupon payment, while the other only pay's a 6% coupon. Assume current yields for AAA bonds are 7%. Explain why your yield to maturity..
If you have $675,000 saved for retirement how many years will it last if you earn an annual interest rate of 7% and withdraw $46,000 at the beginning of each year? Assume you won $60 million in the lottery. You were given the option of receiving twen..
Carla Lopez deposits $7980 a year into her retirement account. If these funds have an average earning of 3 percent over the 19 years until her retirement, what will be the value of her retirement account?
You have a portfolio with a beta of 1.59. What will be the new portfolio beta if you keep 86 percent of your money in the old portfolio and 14 percent in a stock with a beta of 0.58? (Do not round intermediate calculations and round your answer to 2 ..
You just won the lottery and want to give some money to a good cause. Because you have enjoyed this class so much, especially the tests, you decide to give $10,000 to HCC to fund student scholarships. HCC is a non-profit educational institution. What..
The Graber Corporation’s common stock has a beta of 1.2. If the risk-free rate is 4.3 percent and the expected return on the market is 13 percent, what is the company’s cost of equity capital?
Since interest on debt is tax deductible and dividend on stock is not. Companies are financially better off issuing as much debt as possible. The optimal capital structure is the same for all the companies in the each industry.
You are not thrilled about spending your entire life working. So, you have decided that you will save $9 thousand a year, starting at the end of this year, and retire as soon as you can accumulate $1 million. If you can earn an average of 7.23 percen..
Preferred stock has a dividend of $12 a year. The required return is 6%. what should the price per share be?
Bill Dukes has $100,000 invested in a 2-stock portfolio. $35,000 is invested in Stock X and the remainder is invested in Stock Y. X's beta is 1.50 and Y’s beta is 0.70. What is the portfolio's beta?
You counter the publisher's offer with a counter-offer that will pay you $1.5 million today plus $5 per book sold in each of the next three years.
You purchase a stock today for $32.38. You think a similar risk investment should earn 11.6%. You plan to hold the stock for 3 years. If you sell the stock for $40.00, would you reach your required investment goal?
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