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Warden Co plans to buy a new machine to replace an old one. The cost of the machine, payable immediately, is $1,000,000 and the machine has an expected life of 5 years. The machine will cause networking capital to decline at the start of the first year of operation. At the end of the five years, the machine will be sold for scrap, with the scrap value expected to be 5% of the initial purchase cost of the machine. The old machine was bought 9 years ago for $400,000 and was being depreciated over 10 years . The current market value of the machine is $20,000. Production and sales from the new machine are expected to be 100,000 units per year. Each unit can be sold for $16 per unit and will incur variable costs of $11 per unit. Selling price inflation is expected to be 3% per year and variable cost will exhibit a similar level of inflation. Prior to purchase of the machine, total fixed cost per year were $180,000 but with the new machine total fixed cost is $300,000 per year. Warden Co has an after-tax cost of capital of 11% which it uses as a discount rate in investment appraisal. The company pays profit tax an annual rate an annual rate of 30% per year. Required: a) Calculate the NPV of investing in the new machine and advise whether the investment is financially acceptable b) Calculate the IRR of investing in the new machine and advise whether it is financially acceptable.
The common stock of Auto Deliveries sells for $25.96 a share. The stock is expected to pay $2.00 per share next month when the annual dividend is distributed. Auto Deliveries has established a pattern of increasing its dividends by 4.5 percent annual..
How much total interest will Grouper pay on this payment plan? What is the Manufacturers rate ?
A Person plans to retire today and expects to begin living off their retirement savings beginning one year from now and continuing until death. Identify and explain key variables that will influence the amount of income that can be taken from retirem..
Maxine Leo, vice president of marketing for 3D-vious Printers, Inc., must decide whether to introduce a mid-priced version of the firm’s 3D printer product line—the 3D X. The 3D X would sell for $3,900 with unit variable costs of $1,800. Should Maxin..
Too Green, Inc., is a young start-up company and it expects no dividends on the stock over the next 4 years because the firm needs to plow back its earnings to fuel growth. The company will pay a $3.3 per share dividend in 5 years and will increase t..
To pay for her college education, Gina is saving $2,000 at the beginning of each year for the next eight years in a bank account paying 12 percent interest. How much will Gina have in that account at the end of 8th year?
The differences identified in variance analysis are often interdependent.
The next dividend payment by Wyatt, Inc., will be $3.10 per share. The dividends are anticipated to maintain a growth rate of 6.25 percent, forever. Assume the stock currently sells for $49.80 per share. What is the expected capital gains yield? What..
Some say debt is expensive is equity is free. Some say equity is expensive and debt is lower cost that equity.
Abe made the following transactions in a mutual fund: The fund paid a dividend of $2 per share
The principles of subsidiary and correspondence are used to:
how much is the yield to maturity (YTM) on this new bond?
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