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1. Suppose for buying the new machine in question 1, you can lease (operating lease) the machine for 8 years and annual operating lease payments (LP) of $150,000 (from year 1 to year 8). Considering income tax of 40% and minimum ROR of 10%, calculate the ATCF and NPV of leasing the machine. Compare your result with the previous question.
2. New machine: If you decide to replace the old machine with a new one, it requires capital cost of $1,000,000 in year zero (and zero salvage value for the old machine). Capital cost is depreciable from year 1 to year 8 (over eight years) based on MACRS 7-year life depreciation with the half year convention (table A-1 at IRS). The new machine can produce income of $450,000 and operating cost of $150,000 per year for 8 years (from year 1 to year 8) and it will have salvage value of 200,000 at the end (with zero book value) , you can lease the machine for 8 years using a capital lease with annual lease payments of $170,000 (from year 1 to year 8) and lease interest rate of 6%. Depreciation, revenue and operating cost will be similar to question 1. Considering income tax of 40% and minimum ROR of 10%, calculate the ATCF and NPV of leasing the machine. Please calculate and include the lease principal and interest calculations.
Suppose you own a two-security portfolio. You have 54% of your money invested in Security X and the remainder in Security Y. The standard deviations of Securities X and Y are 30 percent and 25 percent. What is the correlation between the two securiti..
A firm can make any form of distribution to its shareholders using the free cash flow tht it generates. The underlying objective is to maximize shareholder wealth by increasing the firm's value. Invest in business facility improvement. Pay interest e..
The next dividend payment by Wyatt inc will be 3.30 per share. The dividends are anticipated to maintain growth rate of 2.75% forever. If the stock currently sells for 50.20 per share want is the required return?
A U.S. investor bought a 6 year German federal bond (Bund), the face value of the bonds is 1,000 EUR, the coupon is 1.5%, and the price 1, 125 EUR. At the time of buying the bond, the exchange rate was 1.3824 [USD/EUR], now, three years later, it is ..
Clariton Antiques Ltd have just been approached by'We Finance Limited', a venture capital organisation,
The Gecko Company and the Gordon Company are two firms whose business risk is the same but that have different dividend policies. Gecko pays no dividend, whereas Gordon has an expected dividend yield of 3 percent. Suppose the capital gains tax rate i..
Dinero Bank offers you a five-year loan for $69,000 at an annual interest rate of 8.5 percent. What will your annual loan payment be?
The spot price of an investment asset that provides no income is $30 and the risk-free rate for all maturities (with continuous compounding) is 10%. Show all work. What, to the nearest cent, is the three-year forward price? Assume that the asset prov..
You have accumulated some money for your retirement. You are going to withdraw $91,026 every year at the beginning of the year for the next 18 years starting from today. How much money have you accumulated for your retirement? Your account pays you 1..
International trade agreements eliminate trade barriers between countries, promote investments, infuse competitiveness, enhance productivity, create jobs, and provide consumers with a greater range of options at cheaper prices.
Given the following information, calculate the weighted average cost of capital for Digital Processing Inc. Line up the calculations in the order shown in Table 11-1.
When estimating the cost of debt to use in the WACC, which of the following types of debt should be included?
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