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Tomatoes Inc. is planning a project that involves machinery purchases of $100,000. The new equipment will be depreciated over five years straight line. It will replace old machinery that will be sold for an estimated $36,000 and has a book value of $22,000. The project will also require hiring and training 10 new people at a cost of about $12,000 each. All of this must happen before the project is actually started. The firm’s marginal tax rate is 40%. Calculate C0, the project’s initial cash outlay.
please do in excel with explanation.
Capital budgeting can be affected by exchange rate risk, transfer pricing, and strategic risk. Explain how these factors may and can impact capital budgeting.
Messman Manufacturing will issue common stock to the public for $40. The expected dividend and growth in dividends are $3.50 per share and 3%, respectively. If the flotation cost is 9% of the issue's gross proceeds, what is the cost of external equit..
Jiminy’s Cricket Farm issued a bond with 10 years to maturity and a semiannual coupon rate of 8 percent 3 years ago. The bond currently sells for 96 percent of its face value. The company’s tax rate is 35 percent. What is the pretax cost of debt? Whi..
You are to make monthly deposits of $735 into a retirement account that pays an APR of 10.1 percent compounded monthly. If your first deposit will be made one month from now, how large will your retirement account be in 33 years?
Discuss the move by the SEC towards using international accounting standards (IAS). Do you believe that the use of IASs will make it easier for investors in a global economy, or do you think the SEC is abdicating our national sovereignty to foreign r..
Monarch Machines sponsors a 15% money purchase pension plan and 401(k) profit sharing plan in which the employees are permitted to defer up to 75% of their compensation. Monarch Machines matches employee deferral contributions 100% up to 6% of deferr..
You are the head of finance department in XYZ Company. You are considering adding a new machine to your production facility. What is the initial cash outlay?
In 1991, Mario Smith and Luigi Joseph signed a lease for 3960 South State Street in Philadelphia, Pennsylvania. Joseph paid $6,000 for the first and last month's rent, and said to Smith, “We are in this together, partner.” Smith bought business cards..
Halliford Corporation expects to have earnings this coming year of $3.29 per share. Halliford plans to retain all of its earnings for the next two years. For the subsequent two? years, the firm will retain 52% of its earnings. Assume? Halliford's sha..
Bond J has a coupon rate of 7 percent and Bond K has a coupon rate of 13 percent. Both bonds have 20 years to maturity, make semiannual payments, and have a YTM of 10 percent. If interest rates suddenly rise by 2 percent, what is the percentage price..
J & B Corp. is investing in a major capital budgeting project that will require the expenditure of $20 million. The money will be raised by issuing $5 million of bonds, $3 million of preferred stock, and $12 million of common stock.
Shark Corporation's target capital structure is 30% debt, 15% preferred, and 55% common equity. The interest rate on new debt is 7%, the yield on the preferred is 6.00%, the cost of common from reinvested earnings is 11.25%, and the tax rate is 40%. ..
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