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The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer’s base price is $1,080,000, and it would cost another $22,500 to install it. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $605,000. The MACRS rates for the first three years are 0.3333, 0.4445, and 0.1481. The machine would require an increase in net working capital (inventory) of $15,500. The sprayer would not change revenues, but it is expected to save the firm $380,000 per year in before-tax operating costs, mainly labor. Campbell’s marginal tax rate is 35%.
What is the NPV if the project cost of capital is 12%.
Suppose you know that a company’s stock currently sells for $65.30 per share and the required return on the stock is 9 percent. You also know that the total return on the stock is evenly divided between capital gains yield and dividend yield. Require..
Your retirement strategy is to invest 500 per month in an equity mutual fund and 200 per month in a bond fund. Your retirement date is 40 years from now. The expected return on the stock fund is expected to be 6% and the expected return on the bond f..
You find a zero coupon bond with a par value of $10,000 and 19 years to maturity. The yield to maturity on this bond is 4.1 percent. Assume semi annual compounding periods. What is the price of the bond?
Use the following financial statement(s) to answer the questions below: Balance sheet of XYZ - Canada Cash CD 1000000 Debt 5000000 AR 3000000 Equity 6000000 FA 5000000 Inventory 2000000 CD 11000000 CD 11000000 Dollar Translation on May 31 CD2=$1 Cash..
A Treasury bill that settles on May 18, 2012, pays $100,000 on August 21, 2012. Assuming a discount rate of 3.87 percent, what is the price and bond equivalent yield? Use Excel to answer this question.
Earnings have been running at about the same level as dividends - Calculate the price per share required in a new public issue
Explain how macrohedging differs from microhedging.
Options are used to insure an existing portfolio. For example, buying a put on an asset (or portfolio) reduces the risk of loss in case of a drop in value of the asset. In order to hedge the currency risk, an investor can take a position with a forei..
Your uncle has $375,000 and wants to retire. He expects to live for another 25 years, and he also expects to earn 7.5% on his invested funds. How much could he withdraw at the beginning of each of the next 25 years and end up with zero in the account..
What is the firm's optimal capital budget when differential risk is considered and what is the firms optimal capital budget?b. Now, suppose Medtronics managers want to consider differential risk in the capital budgeting process.
Find the current exchange rates online and post the current exchange between the U.S. dollar and any other currency. Briefly describe what has happened over the past year between the two.
Southern Fields has an inventory of 838,000 pounds of sugar. The firm placed a partial hedge on this inventory by selling 6 futures contracts at 9.56. The futures contracts are based on 112,000 pounds and quoted in cents per pound. At the time the fi..
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