Calculate the cash outflow at time zero

Assignment Help Finance Basics
Reference no: EM13270402

The Marchal Company is evaluting the proposed acquisition of a new machine. The machine base price is $250,000 and it would cost another $15,000 to modify it for special use. The machine fall into the MACRS 3 year class, and it would be sold after 2 years for $75,000. The machine would require an increase in net working of $5,000. The machine would have no effect on revenues, but it is expected to save the firm $100,000 per year for 2 years in before-tax operating costs.. Campbell's marginal tax rate is 30 percent and it cost of capital is 10 percent.

a. calculate the cash outflow at time zero
b. calculate the net operating flows for Years 1 and 2
c Calculate the non-operating terminal year cash flow
d calculate NPV. Should the machinery be purchased. Why or why not?

 

Reference no: EM13270402

Questions Cloud

What is the force exerted by the water on the bottom : A swimming pool has dimensions 32.0 m ? 12.0 m and a flat bottom. The pool is filled to a depth of 2.30 m with fresh water. What is the force exerted by the water on the bottom
How much of karen portfolio is invested in the technology : The utility fund has a beta of 0.5. and the technology fund has a beta of 1.3. If the portfolio's beta equals 1.26. how much of Karen's portfolio is invested in the technology fund?
How much momentum is lost in the collision : Ikjoo Yoo of the Tampa Bay Lightning has had his slap shot clocked at 102.1 mph (45.64 m/s). How much momentum is lost in the collision
Explain what is the energy of exactly one photon : Microwave ovens emit microwave energy with a wavelength of 12.6 cm. What is the energy of exactly one photon of this microwave radiation
Calculate the cash outflow at time zero : Campbell's marginal tax rate is 30 percent and it cost of capital is 10 percent.
Find maximum speed of the glider : An air-track glider attached to a spring oscillates between the 12.0cm mark and the 61.0cm mark on the track. find maximum speed of the glider
Define to resolve an object in an electron microscope : To resolve an object in an electron microscope, the wavelength of the electrons must be close to the diameter of the object. What kinetic energy must the electrons have in order to resolve a protein molecule that is 7.00 nm in diameter? Take the m..
Determine what is the ac machine efficiency : Suppose that the machining operation requires 1 kW, that the tool machine ihas 90 percent efficiency, and that the supply current is 14 A rms with a power factor of 0.8. Find the AC machine efficiency.
Explain one type of electromagnetic radiation has frequency : one type of electromagnetic radiation has a frequency of 107.1 MHz another type has a wavelength of 2.12*10^-10m,and another type ofelectromagnetic radiation has photons with energy equal to 3.97*10^-19J/photon. identify each type of electromagnet..

Reviews

Write a Review

Finance Basics Questions & Answers

  Why has hmc been so successful

compares the finances of Honda Motors (HMC) to the finances of General Motors (GM). Why has HMC been so successful, and why has GM been lagging ?

  Primary activities of financial manager

Determine the amount earned during the accounting period on each outstanding share of common stock is called, Included in the primary activities of financial manager,

  Relationship between bond prices and interest rates

Discuss and explain the relationship between bond prices and interest rates and what impact do changing interest rates have on the price of long-term bonds versus short-term bonds?

  Currency forward prices

Suppose the current exchange rate between Germany and Japan is 0.02? ¥. The euro-denominated annual continuously compounded risk-free rate is 4% and the yen-denominated annual continuously compounded risk-free rate is 1%.

  Concept of inefficient markets and corporate decisions

Suppose the comments of Brian Walker, the president of Herman-Miller North America, who was quoted in chapter as having said: 'For dot.coms, it appears that market has implicitly capitalized a lot of those costs.

  Overview of us publicly traded company

Provide a detailed overview of the U.S. publicly traded company, Priceline. This should be 3 pages. Evaluate the company's vulnerability to current financial threats, such as a recession, higher interest rates, and global competition.

  Computation of value of the stock using constant growth

computation of value of the stock using constant growth model where The current risk-free rate of return is 5% and the market risk premium is 8%

  Wealth management question

If market interest rates are currently 15 percent and your investment provides you this 15 percent return, does that imply that you are 15% more wealthy.

  Verify that put-call parity holds

Consider an option on a non-dividend-paying stock when the stock price is $30, the exercise price is $29, the risk-free interest rate is 5% per annum, the volatility is 25% per annum, and the time to maturity is four months.

  Cost of debt and preferred stock

The Treasurer of BioScience, Company, is asked to calculate cost of fixed income securities for her corporation. Even before making computations, she suppose the after-tax cost of debt is at least 2 percent less than that for preferred stock.

  Review the key problems

I have just been hired through the new president of Playword Greeting Cards, an established company that sells greeting cards and collectibles to its own line of company-owned and franchise stores.

  Computation of earnings per share

Analysis was forecasting fiscal 2003 and 2004 earnings per share for Cisco systems of $.54 and $.61 respectively. Cisco's shares traded at $15 at the time. Suppose the long-term growth rate will be at 4%.

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