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Lang Industrial Systems Company (LISC) is trying to decide between two different conveyor belt systems. System A costs $248,000, has a four-year life, and requires $77,000 in pretax annual operating costs. System B costs $348,000, has a six-year life, and requires $71,000 in pretax annual operating costs. Suppose LISC always needs a conveyor belt system; when one wears out, it must be replaced. Assume the tax rate is 30 percent and the discount rate is 9 percent.
Calculate the EAC for both conveyor belt systems. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
Rierson owns a garment factory in Spain and sells designer clothes to US and other European countries. He is trying attract some investments from US that he can use to expand further into the US market. He decides to invest into ten year 1,000 EURO G..
Using the Gordon growth model, explain why the 2001 terrorist attacks and the Enron financial scandal caused stock prices to decline
What negative financial factors would lead Allied to decide not to extend credit to Websters? What additional information about Websters would be useful in performing the analysis?
A 7.80 percent coupon bond with 16 years left to maturity is priced to offer a 8.5 percent yield to maturity. You believe that in one year, the yield to maturity will be 8.1 percent. What is the change in price the bond will experience in dollars?
M Company is considering whether to establish a sale distribution center in China. Given the large Chinese consumer market, M company estimates that its net sales revenues will be 15 million yuans in the first year, 20 million yuans in the second yea..
Hankins, Inc., is considering a project that will result in initial aftertax cash savings of $6.2 million at the end of the first year, and these savings will grow at a rate of 3 percent per year indefinitely. What is the maximum cost the company wou..
A firm is looking to invest in a new sports drink. They must invest $4 million today and another $4 million in one year. They expect that in two years, they will receive $3 million in free cash flow, and this will continue for 5 years (so the final $..
You have a portfolio with a beta of 1.77. What will be the new portfolio beta if you keep 82 percent of your money in the old portfolio and 18 percent in a stock with a beta of 0.93?
Which one of the following is correct for a firm with $400,000 in net earnings, 50,000 shares, and a 30% payout ratio? A. Retained earnings will increase by $120,000. B. Each share will receive a $1.20 dividend. C. $120,000 will be spent on new inves..
The price of a risk free bond with face value $12 and maturity one year is one dollar higher than the spot price of stock A. Also, a call option on stock A with a strike price $12 and maturity 1 year, has a premium of $0.21. What is the value of a pu..
The earnings and dividends of MicroSun Computer Co. are expected to grow at an annual rate of 15% over the next 4 years and then slow to a constant growth rate of 8% per year. MicroSun currently pays a dividend of $0.50 per share. What is the value o..
Consider a firm with a debt-equity ratio of 0.40. The required rate of return on this firm’s unlevered equity is 18% and the pre-tax cost of debt is 8%. Sales, which totalled $34 million last year, are projected to remain at that level for the forese..
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