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The Taylor Corporation is using a machine that originally cost $88,000. The machine is being depreciated by the straight-line method over 8 years ($11,000 per year) and has 4 years of depreciation remaining. The machine has a book value of $44,000 and a current market value of $40,000. Jacqueline Elliott, the Chief Financial Officer of Taylor, is considering replacing this machine with a newer model costing $75,000. The new machine will save $5,000 in after-tax earnings each year for the next six years. The new machine is in the 5-year MACRS category. Taylor Corporation is in the 34% tax bracket and has a 10 percent cost of capital. a) Calculate the cash inflows from the sale of the old machine. b) Calculate the net cost of the new machine. c) Calculate the incremental depreciation on the new versus the old machine. d) Determine the net present value of the new machine. Should they purchase the new machine?
What is the internal rate of return for a project that has a net investment of $370,000 and net cash flows of $60,000 in year 1, $75,000 in year 2, and $85,000 in years 3 through 8?
The firm has total debt with a book value of $55 million, but interest rate declines have caused the market value of the debt to increase to $65 million. What is this firm's market-to-book ratio?
Explain Capital budgeting involves calculation of IRR, NPV, Payback period and If the required return is greater than the coupon rate
Sherwood Corporation is using these financial statements to entice investors to purchase stock in the company. However, a recent FBI investigation revealed that the sale of real estate was a fabricated transaction with a fictitious Corporation.
A mutual fund manager expects her portfolio to earn a rate of return of 11 percent this year. The beta of her portfolio is .8. should you invest in this mutual fund? Show your work and explain why or why not.
How much interest did you pay in the first year and how much was your mortgage reduced in the first year?
Currently, Warren Industries can sell 15-year, $1,000-par-value bonds paying annual interest at a 12% coupon rate. As a result of current interest rates, the bonds can be sold for $1,010 each; flotation costs of $30 per bond will be incurred in th..
What do you believe is the suitable rate other than 8.00% to utilize as the discount rate for these computations.
Assume that net capital spending was zero, no new investments were made in net working capital, and no new stock was issued during the year. Calculate the firms new long term debt added during the year.
Below are details of a semiannual bond. Please show work in Excel spreadsheet. Par value = 1000; Maturity 4 years; Market rate if interest (yield to Maturity) = 11% per annum; Coupon rate = 8% per year paid semiannually.
Wild Wings has 80,000 shares of common stock outstanding at a price of $28 a share. It as well has 15,000 shares of preferred stock outstanding at the price of $63 a share.
Discuss some of the implications of overpaying for an acquired company?
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