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1. The president of Real Time Inc. has asked you to evaluate the proposed acquisition of a new computer. The computer's price is $40,000, and it falls into the MACRS 3-year class. Purchase of the computer would require an increase in net operating working capital of $2,000. The computer would increase the firm's before-tax revenues by $20,000 per year but would also increase operating costs by $5,000 per year. The computer is expected to be used for 3 years and then be sold for $25,000. The firm's marginal tax rate is 40 percent, and the project's cost of capital is 14 percent. What is the projects NPV?? Should they go forward and complete the project?? Why??
Macrs 3 Year Schedule
AnnualYear Depreciation1 33%2 453 154 07
2. The initial equity capital of Toys 4 Tots, Inc. consisted of 10 million shares sold at $0.25 par value per share. The company has been in business for a year and has earned net income of $500,000, paid $100,000 in dividends, and retained the balance. The stock is now selling at 15x earnings. Calculate its market value per share. Discuss what this figure represents.
Determine how could a country risk assessment be used to adjust a project's required rate of return? How could such an assessment be used instead to adjust a project's estimated cash flows?
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The Best Manufacturing Corporation is planning a new investment. Financial projections for the investment are tabulated below. Cash flows are in $ thousands, and the corporate tax rate is 34%.
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Apocalyptica Corporation pays a constant $7.25 dividend on its stock. The firm will maintain this dividend for the next nine years and will then cease paying dividends forever.
Measure each of these items and prepare the journal entry that should be made to record the purchase on Energy's books.
A financial advisor tells you that you can make your child a millionaire if you just start saving early. You decide to put an equal amount every year into an investment account that earns 8 percent interest per year, beginning on the day your child i..
You've observed the following returns on Crash-n-Burn Computer's stock over the past 5 years: 115, -115, 18%, 23 percent, and 10%.
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