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Your company is considering the purchase of a new machine. The original cost of the old machine was $75,000; it is now 5 years old, and it has a current market value of $20,000. The old machine is being depreciated over a 10-year life toward a zero estimated salvage value on a straight-line basis, resulting in a current book value of $37,500 and an annual depreciation expense of $7,500. The old machine can be used for 6 more years but has no market value after its depreciable life is over. Management is contemplating the purchase of a new machine whose cost is $60,000 and whose estimated salvage value is zero. Expected before-tax cash savings from the new machine are $10,000 a year over its full MACRS depreciable life. Depreciation is computed using MACRS over a 5-year life, and the cost of capital is 9 percent. Assume a 40 percent tax rate. What will the year 1 operating cash flow for this project be?
$3,300$4,236$7,800$13,200
Mr. Blochirt is creating a college investment fund for his daughter. He will put in $1,000 per year for the next 14 years and expects to earn a 6% annual rate of return. How much money will his daughter have when she starts college?
Stock A has a beta of 1.2 and a standard deviation of 25%. Stock B has a beta of 1.4 and a standard deviation of 20 percent. Portfolio AB was created by investing in a combination of Stock A and Stock B.
A project anticipates net cash flows of $10,000 at the end of year one, with such amount increasing at the expected 5 percent rate of inflation over the subsequent four years.
You are an individual within the finance area of your company, and you are preparing final budgets to present to your board of directors for the coming year.
Sutton Corporation, which has a zero tax rate due to tax loss carry-forwards, is considering a 5-year, $6,000,000 bank loan to finance service equipment.
Establish an estimated growth rate in earnings & dividends for British Petroleum. Note, in the dividend growth model, "g" is growth rate for earnings & dividends.
What is the value of a preferred stock when the dividend rate is 14 percent on a $100 oar value? The appropriate discount rate for a stock of this risk level is 12 percent.
Prepare a multi-step income statement and a classified balance sheet in proper form using accrual accounting.
What is the value of a six month European call option on the futures with a strike price of 60? If the call were American would it ever be worth excerising it early?
You own a portfolio that is 34 percent invested in Stock X, 22 percent in Stock Y, and 44 percent in Stock Z. The expected returns on these three stocks are 11 percent, 18 percent, and 14 percent, respectively. What is the expected return on the po..
The Borstal firm has to choose between 2 machines that do the same job but have different lives. The 2 machines have the following costs:
Mr. Miser, who is 35 years old, has just inherited $11,000 and decides to use the windfall towards his retirement. He places the money in a bank which promises a return of 6 percent per year until his planned retirement in 30 years.
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