Company is purchasing a new piece of equipment

Assignment Help Financial Management
Reference no: EM131450876

1. Your company is purchasing a new piece of equipment for $35,000 and will keep it indefinitely. For accounting purposes, the equipment will be depreciated straight-line for three years to an ending book value of $5,000. Your company's tax rate is 35% and the OCC is 12%. Calculate the net cost of the equipment in PV terms.

2. Suppose the equipment will be scrapped at year 4 for $8,000.

3. Suppose the equipment will be resold at year 2 for $20,000.

4. Suppose the equipment will be scrapped at year 4, but projected inflation is raised by 3% per year. Correspondingly, the OCC is raised to 15%.

Reference no: EM131450876

Questions Cloud

What is the present value of these cash flows : what is the present value of these cash flows?
Responsible for processing payment of invoices for vendors : The accounts payable department is responsible for processing payment of invoices for vendors.
Importance of external financial reporting to third parties : Discuss the importance of external financial reporting to third parties
Find the future values of these ordinary annuities : Find the future values of these ordinary annuities. Compounding occurs once a year.
Company is purchasing a new piece of equipment : Your company is purchasing a new piece of equipment for $35,000 and will keep it indefinitely.
What is the value of the option to abandon the project : What is the NPV of the base case? What is the value of the option to abandon the project?
Credibility risk premium to the required return : “credibility” risk premium to the required return as part of her valuation analysis.
What is the intrinsic value of the stock : A company currently pays no dividend. It is expected that it is going to pay first dividend of $5/share in four years. What is the intrinsic value of the stock?
Annual return net of expenses : Assume a 10% annual return net of expenses before the 12b-1 fee is applied. How do you calculate $100 for investment?

Reviews

Write a Review

Financial Management Questions & Answers

  What is the intrinsic value of firm of projected dividends

Whole Foods’ current dividend per share is $1.07. You expect dividends to grow at 5% per year into perpetuity. Whole Foods’ beta is 0.85. The current riskfree rate is 2.9%, and the expected return on the market portfolio is 7.4%. what is the intrinsi..

  Determine which has a higher roi

You will make a variety of decisions. You should consider the financial and nonfinancial aspects while making decisions - evaluate scenarios, you will also use some tools such as net present value (NPV) and return on investment (ROI) that you have d..

  Standard deviation of crash-n-burn’s returns over period

You’ve observed the following returns on Crash-n-Burn Computer’s stock over the past five years: 20 percent, –12 percent, 17 percent, 20 percent, and 10 percent. a. What was the arithmetic average return on Crash-n-Burn’s stock over this five-year pe..

  Calculate the dupont analysis and operating income margin

Calculate the Net profit margin, Return on assets, Total asset turnover, DuPont analysis and Operating income margin for 2011, 2010, and 2009:

  Question 1the underlier is trading at a spot price of 100

question 1the underlier is trading at a spot price of 100. the ten year riskless interest rate is trading at 10 p.a.

  What should spot price for the us dollar to the swiss franc

What should the spot price for the US dollar to the Swiss franc be in Zurich?- Should the dollar be quoted at CHF1.85 in Zurich, how would the market react?

  When an investment banker acts as underwriter

When an investment banker acts as an "underwriter" he

  Average does it take the firm to sell its inventory

North Side Wholesalers has sales of $948,000. The cost of goods sold is equal to 72 percent of sales. The firm has an average inventory of $23,000. How many days on average does it take the firm to sell its inventory?

  What is the current value of one share of this stock

Combined Communications is a new firm in a rapidly growing industry. The company is planning on increasing its annual dividend by 23 percent a year for the next 4 years and then decreasing the growth rate to 5 percent per year. The company just paid ..

  Strong dollar against the euro hurts sales

General Motors exports cars to Spain, but the strong dollar against the euro hurts sales of GM cars in Spain. In the Spanish market, GM faces competition from Italian and French car makers, such as Fiat and Renault, whose operating currencies are the..

  Describe and explain purchasing power parity

What is a price to sales ratio; how is it used to value a company? Pick a publicly traded company, do a fundamental analysis and a valuation using one of the methods in Chapter 8 (Stock Valuation). Describe and explain American Depositary Receipts (A..

  Calculate the return of the portfolio

We have a portfolio that is invested 70% in Asset A and 30% in Asset B. Calculate the Return of the portfolio under each of the given states of the economy. What is the overall Expected return of the portfolio? What is the standard deviation of the $..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd