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Murray’s Machine Shop is considering a five year project to improve its production efficiency. Buying a new machine press for $850,000 is expected to result in annual pre-tax cost saving of $310,000. No additional sales are expected from this project. The machine press will be depreciated straight-line to zero over its five year life. After that it is expected to be obsolete and therefore worthless. The company will be able to reduce net working capital (NWC) by $75,000 at the beginning of the project. NWC will revert back to its original level at the end of project. The company’s hurdle rate is 15%. The tax rate is 21%. a. List all the assumption of the project. b. Calculate each year’s depreciation and ending book values. c. Prepare pro forma income statements for the five years of the project’s life. d. Calculate the changes in net working capital. e. Calculate the project’s operating cash flows. f. Calculate the project’s net net cash flows. g. Calculate the project’s net present value (NPV) h. Calculate the project’s internal rate of return (IRR) i. Should the company purchase the new machine press? Why or why not? (Must be done on a spreadsheet using Excel formulas only)
You expect an investment to return $11,300, $14,600, $21,900, and $38,400 annually over the next four years, respectively. What is this investment worth to you today if you desire a rate of return of 16.5 percent?
The cost of the project is $1,200,000, which will be an immediate expense. The project is expected to produce cash flows in year 3 (end of Year) of $400,000 and this cash flow will grow at 15% for the following 5 years. At the end of the 6th year a c..
Find out the data rates and costs of T carrier services in your area. - Find out the data rates and costs of packet-switched and dedicated-circuit services in your area.
Consider the upper-bound for the call option
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It is the end of your final year of study as a student in the Master of Finance program and you are trying to determine what you are going to do over the remaining 35 years of your working life. You are trying to decide whether you should remain at u..
Payroll expense properly split between direct and indirect labor would be an example of which assertion?
Which one of the following taxpayers qualify for the earned income credit?
An ordinary annuity has an interest rate of 10% and a future value of 80.00. What would be the future value of this same annuity, if it were an annuity due instead of a regular annuity? The future value of this annuity due is $
Describe the financial effects of the swap for Home Depot. At what LIBOR rate does Home Depot benefit from the swap?
Pine Tree Farms Corporation (PTFC) has a target capital structure of 30% debt, 10% preferred stock, and 60% common equity. Currently PTFC has a capital structure of 75% debt, 10% preferred stock, and 15% common stock.
The cost of issuing and selling the preferred stock is expected to be rm5 per share.preferred stock can be sold under these terms.
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