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Maddux, inc is planning to purchase equipment worth $400,000. Delivery and setup costs will amount to $20,000. In addition, $25,000 in net working capital will be required at installation. The equipment will have a 5 years class life and will be depreciated using simplified straight line. Maddux has a marginal tax rate of 34 percent and a cost of capital of 12 percent. The new equipment will increase the firm's revenues by $220,000 per year, decrease defects costs by $10,000 per year, and increase operating costs by $30,000 per year.A.) Suppose Maddux keeps the equipment for 3 years and sells it for $200,000. What are the project's IRR and NPV?B.) Suppose Maddux can only get $100,000 for the equipment after 3 years due to the rapidly changing technology. What is the project's IRR and NPV?
Suppose the following information over a five year period: Estimate which stock has higher risk-adjusted returns when using the Sharpe index.
A student lend $4000 from a credit union toward buying a car. The interest rate on such a loan is 14 percent compounded quarterly, with payments due each quarter.
Airstat is replacing an old stamping line that cost 80,000$ 5 years ago, with a new, more efficient equipment that will cost $225,000. Shipping and installation cost an additional $20,000.
Stocks x and Stock y have the following probabiltiy distributionsof expected future returns: Compute the expected rate of return and standard devaiation of expected returns
McFugal, Inc. has expected sales of $20 million. Fixed operating cost are 2.5 million, and variable cost ratio is 65%. McFrugal has outstanding a $12 million, 8% bank loan.
Explain the many ways transaction costs are problematic in financial markets. As part of your response give an actual example with a numerical breakdown that illustrates this problem.
Assume that during a given year: the price of TV sets increases by 4% in Japan, the dollar depreciates by 5% with respect to the yen, customer incomes in the U.S. increase by 3%,
Most initial public offerings (IPO) are made with assistance of an investment banker. Main activity of an investment banker is underwriting the issue.
Pavlovich Instruments, Corporation, a creator of precision telescopes, expects to report pre-tax income of $430,000 this year. The firm's financial manager is planning the timing of a purchase of new computerized lens grinders.
Velcro Saddles is planning the acquisition of Pogo Ski Sticks, Corporation. The values of the two companies as separate entities are $20 million and $10 million, respectively.
Valuation of cash flows and purchase price of equipment with changes in the exchange rates
Regarding of your work above, suppose that D0, which was just paid, = $1.00, D1= $1.20, D2 = = $1.40, D3 = $1.55, D4 = $2.00, D5 = $2.13, D6 = $2.27, and P3 = $80.00.
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