Aerospace products acquired new multispindle

Assignment Help Financial Management
Reference no: EM131070501

A manufacturer of aerospace products acquired a new multispindle, multi-turret turning center for $250,000. The machine will generate new revenue of $80,000 per year. Operating costs for the machine will average $10,000 per year. The machine will be depreciated using the MACRS method, with a recovery period of 7 years. The useful life of the turning center is 10 years; it is estimated that its salvage value will be $25,000 at this time. The company uses an after-tax MARR rate of 12% and is in the 35% tax bracket.

1. Determine whether the (discounted) payback period occurs within the useful life of the turning center.

Now, suppose that the project duration is 5 years and that an estimate of the value of the equipment cannot be obtained from the marketplace.

2. Estimate the salvage value using the appropriate technique.

Reference no: EM131070501

Questions Cloud

What is the effective annual rate on loan : You’ve borrowed $6,903.71 and agreed to pay back the loan with monthly payments of $270. Assume the interest rate is 15% stated as an APR. How long will it take you to pay back the loan in Number of months? What is the effective annual rate on the lo..
What is the firm market capitalization : A firm has just reported net income of $500 Million for the latest year. In addition, the firm has outstanding 75 Million shares, each one of which currently trades at $60 per share. What is the firm’s EPS? Therefore, what is its PE ratio? What is th..
Requires an initial fixed asset investment : Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will have a ..
Coupon bond with face value : A 5.5 percent coupon bond with face value of $1,000 matures in 7 years , pays interest semi annually and has a yield to maturity of 6.23 percent. What is the current price of the bond? Does your answer Make sense? Why or why not?
Aerospace products acquired new multispindle : A manufacturer of aerospace products acquired a new multispindle, multi-turret turning center for $250,000. The machine will generate new revenue of $80,000 per year. Operating costs for the machine will average $10,000 per year. Determine whether th..
Calculating real rates : You’ve observed the following returns on Doyscher Corporation’s stock over the past five years: –24.9 percent, 13.6 percent, 30.2 percent, 2.3 percent, and 21.3 percent. The average inflation rate over this period was 3.23 percent and the average T-b..
Use the free cash flow valuation method : Use the free cash flow valuation method to find the value per share for the following firm: A firm has just reported free cash flow to the firm (FCFF) for the last year as having been $65 Million.
Retirement income will decline annually after he retires : Your father is 50 years old and will retire in 10 years. He expects to live for 25 years after he retires, until he is 85. He wants a fixed retirement income that has the same purchasing power at the time he retires as $45,000 has today. (The real va..
Sometimes referred to as the horizon value : Suppose that a firm will pay dividends of $3.50 next year and $3 in two years. In year 3, the dividend will be $6, and afterwards the dividend will grow at a constant rate of 7% per year. What will be the value of each share of the firm in two years ..

Reviews

Write a Review

Financial Management Questions & Answers

  Assume annual coupon payments

A 6%, 3-year bond yields 12% and a 10%, 3-year bond yields 8%. Calculate the 3-year spot rate. Assume annual coupon payments.

  The current ratio measures liquidity

Which of the following statements about financial statement analysis is(are) most correct? The current ratio measures liquidity.

  Won the church spring raffle

You have won the church spring raffle. You are presented with three price choices, and you must pick the best one. The discount rate if 8%. Choice 1 = $4,800 payment one year from now; Choice 2 = 5 payments of $1,200 starting at the end of this year;..

  Unlimited liability for the obligations of their business

The liability of those who own a corporation is limited to their investment, while proprietors and general partners have unlimited liability for the obligations of their business. Explain what relevance this has for risk management.

  Bonds value would the most affected if interest rates rose

Assume that you bought 5-ycar,, 15-year, and 25-year bonds, all with a 10 percent coupon rnte and semiannual coupons, at their $1,000 par values. Which bond's value would the most affected if interest rates rose to 13 percent? Which would ho least af..

  About the interest rate

What interest rate would make it worthwhile to incur a compensating balance of $20,000 in order to get a 1 percent lower interest rate on a 1 year, pure discount loan of $275,000?

  What is the bonds price and what is the bonds duration

A 5-year bond with YTM of 12% and par value of $1000 pays an 8% annual coupon. What is the bond’s price? What is the bond’s duration?

  What disadvantages are there to outsourcing the activity

Make or Buy Decisions Pick an article (or more) from the literature that tells about a particular company’s outsourcing decision. There are many such articles. Explain why the company decided to outsource the activity. What disadvantages are there to..

  What is the down payment plus the closing costs

What is the down payment plus the closing costs required to be paid at the property settlement closing for purchasing a $250,000 home, if a loan to value of 80% is required and the closing coats will be 3% of the new loan?

  Textbooks between the local bookstore and amazon

At the 0.01 level of significance, is there evidence of a difference in the median price of textbooks between the local bookstore and Amazon.com?

  Nonconstant growth valuation

A company currently pays a dividend of $2.75 per share (D0 = $2.75). It is estimated that the company's dividend will grow at a rate of 19% per year for the next 2 years, and then at a constant rate of 5% thereafter. The company's stock has a beta of..

  Capital budgeting technique project

Following is information about two independent projects that a company is evaluating: Capital Budgeting Technique Project X Project Y Net present value $5,000 $4,950 Internal rate of return 15.5% 17.0% Discounted payback period 5.1 years 4.6 years (a..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd