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As a result of improvements in product engineering, United Automation is able to sell one of its two milling machines. Both machines perform the same function but differ in age. The newer machine could be sold today for $50,000. Its operating costs are $20,000 a year, but in five years the machine will require a $20,000 overhaul. Thereafter operating costs will be $30,000 until the machine is finally sold in year 10 for $5,000. The older machine could be sold today for $25,000. If it is kept, it will need an immediate $20,000 overhaul. Thereafter operating costs will be $30,000 a year until the machine is finally sold in year 5 for $5,000. Both machines are fully depreciated for tax purposes. The company pays tax at 35%. Cash flows have been forecasted in real terms. The real cost of capital is 12%. (Use PV table.) Calculate the equivalent annual costs for selling the new machine and for selling the old machine. Assume inflation is 0%.
What is your financing strategy for the project? Consider construction-period financing and long-term financing alternatives and do you recommend asset-backed financing or traditional portfolio financing
Susan owns a Van Gogh painting valued at 10 million dollar. In addition to painting, Susan owns approximately $15 million of other assets.
The CFO estimates that a proposed expansion would require an investment of $6.8 million. What is the WACC for the last dollar raised to complete the expansion?
You bought a bond five years ago for $935 per bond. The bond is now selling for $980. It also paid $75 in interest per year, which you reinvested in the bond. Calculate the realized rate of return earned on this bond.
In 2004, a pound of apples cost $0.99, while oranges cost $1.14. Ten years earlier the price of apples was only $.72 a pound and that of oranges was $.55 a pound.
A chain of appliance stores, APP Corporation, purchases inventory with a net price of $500,000 each day. The company purchases the inventory under the credit terms of 2/15, net 40.
A loan was made ten years ago with an original balance of $1,000,000.00 at a fixed interest rate of 8.00% with equal monthly payments for thirty years.
Computation of value of the bond and what is the bond's price based on semi-annual compounding
You have just received a windfall from an investment you made in a friend's business. What is the present value of your windfall? What is the future value of your windfall in three years (on the date of the last payment)?
Suppose 90-day investments in Britain have a 6% annualized return and a 1.5% quarterly (90-day) return. In the U.S., 90-day investments of similar risk have a 4% annualized return and a 1% quarterly (90-day) return.
Given the information below, compute the expected return, variance, and standard deviation of the following company.
Evaluate if Lealos should proceed or not and explain the buildup of receivables in this case. The required return is .95 percent per month.
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