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You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $50,000. The truck falls into the MACRS 3-year class, and it will be sold after three years for $19,100. Use of the truck will require an increase in NWC (spare parts inventory) of $1,100. The truck will have no effect on revenues, but it is expected to save the firm $17,200 per year in before-tax operating costs, mainly labor. The firm’s marginal tax rate is 39 percent.
What will the cash flows for this project be? (Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places.)
The company has offered you a $5,000 bonus, which you may receive today, or 100 shares of the company’s stock, which has a current stock price of $50 per share. Mathematically, what is the best choice? Why?
The HWS company was recently formed to manufacture a new product. With the following capital structure: 9% debentures of 2002 ($1000 Par) $6,000,000 7% Preferred stock ($100 Par) $2,000,000 Common Stock (320,000 shs.) $8,000,000 total $16,000,000 The..
What is the standard deviation of the following two-stock portfolio where A and B are equally weighted? E (R ) A: 25% B.12% STD A:30% B.20% Coefficient Correlation -.8 Portfolio STD?
You have your choice of 3 investments. Investment A is a 15-year annuity that features end of month $1500 payments and has an interest rate of 5.5% compounded monthly. Investment B is a 5 percent continuously compounded lump sum investment also for 1..
Business is going well for David Johns Inc., the company that operates remote parking lots near major airports. The board of directors of this family-owned company believes that David Johns Inc. could earn an additional $1.5 million income before int..
PK Software has 9.1 percent coupon bonds on the market with 22 years to maturity. The bonds make semiannual payments and currently sell for 112 percent of par. What is the current yield on PK's bonds? What is the effective annual yield?
Reflecting on the various topics discussed throughout the course, describe one (1) concept that will be affected most by the latest developments in health reform.
A new desktop CNC Training Lathe has a list price of $19,800 and a 15-year estimated life. It is going to be placed in the Manufacturing Laboratory on January 1, 2017. The permissible salvage value of the lathe is zero at the end of 15 years. For the..
You own a portfolio equally invested in a risk-free asset and two stocks. If one of the stocks has a beta of 1.12 and the total portfolio is equally as risky as the market, what must the beta be for the other stock in your portfolio?
We are evaluating a project that costs $1,180,000, has a ten-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. alculate the base-case cash flow and NPV. What is the sensitivity of NPV..
The asking price for a suburban office building is $5,000,000; rents are estimated at $550,000 during the first year and are expected to grow at 2 percent per year thereafter. Vacancies and collection losses are expected to be 6 percent of rents. Cal..
Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next nine years because the firm needs to plow back its earnings to fuel growth. The company will pay a $12 per share dividend 10 years from today ..
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