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Question - New West and Van Corporation is considering to launch an innovative product and estimates sales of 1,650,000 and total costs of $1,205,000 annually. This project requires an investment in equipment of $1,200,000 which expects to last for four years with a salvage value equal to $800,000; the CCA asset class for the equipment will continue to remain after the selling of the equipment. During this time the company will use a 20% CCA rate. At the beginning of the project, it is required to invest $125,000 in working capital which is going to be totally recovered by the end of the project. Assume a tax rate of 35%. If the company's required rate of return is 16%:
a) Determine the NPV of the project. Based on NPV, would you accept the project? Why?
b) Determine the total cash flows for year 0, 1 and the last year of the project.
c) Calculate the IRR for the project. Based on IRR, would you accept the project? Why?
Hubbard argues that the Fed can control the Fed funds rate, but the interest rate that is important for the economy is a longer-term real rate of interest. How much control does the Fed have over this longer real rate?
Coures:- Fundamental Accounting Principles: - Explain the goals and uses of special journals.
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Term Structure of Interest Rates
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Create a cost-benefit analysis to evaluate the project
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Your Corp, Inc. has a corporate tax rate of 35%. Please calculate their after tax cost of debt expressed as a percentage. Your Corp, Inc. has several outstanding bond issues all of which require semiannual interest payments.
Simple Interest, Compound interest, discount rate, force of interest, AV, PV
CAPM and Venture Capital
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