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XYZ Manufacturing Corporation currently has production equipment that has 4 years of remaining life. The equipment was purchased a year ago at a cost of $10,000. The annual depreciation for this machine is $1,800 and its expected salvage value is $1,000. The equipment can be sold today for $8,000. The company has been considering the purchase of a new machine that will replace the existing one. The new equipment costs $15,000 and would increase sales (through increased production) by $2,000 per year and decrease operating costs by $1,000 per year. The equipment falls into the 3-year MACRS class and will be worthless after 4 years. The applicable depreciation rates are 0.33, 0.45, 0.15, and 0.07. The company's tax rate is 40 percent and its cost of capital is 12 percent. By how much would the value of the company change if it accepts the replacement project?
Compute the company's current weighted average cost of capital. calculate the expected net present value, expected profitability index,
Estimate the beta of an equally weighted portfolio.
German consumer-goods maker Henkel AG is touting its new Gliss Restore & Refresh shampoo as the world's first hair-care product to address problems caused by the lack of ventilation under a head scarf, including split ends, itchy scalp and unpleasant..
If investors require an 9% return on the preferred stock, what is the price of the firm's perpetual preferred stock?
What ex-dividend price per share will now make you indifferent between the two trading strategies?
Allen Air Lines must liquidate some equipment that is being replaced. The equipment originally cost $14 million, of which 80% has been depreciated. The used equipment can be sold today for $3.5 million, and its tax rate is 30%. What is the equipment'..
The following events occur in the market for good B, which is a normal good: Identify the impact of the event to the equilibrium price and quantity of each event.
Compute the IRR static for Project E. The appropriate cost of capital is 9 percent. Should the project be accepted or rejected?
You purchased a zero-coupon bond one year ago for $278.83. The market interest rate is now 8 percent. Assume semiannual coumpounding periods. If the bond had 17 years to maturity when you originally purchased it, what was your total return for the pa..
In general, the larger the portion of a firm's sales that are on cash, the
Little Miss Matched has a 6.4% after-tax profit margin and a 20% dividend payout ratio. The debt-equity ratio is 0.65 and the total asset turnover is 1.8. What is the sustainable rate of growth?
Corporate earnings or cash flows have bearing on wealth of shareholders through valuation of the corporation. Discuss Risk Management to avoid financial crisis.
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