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Machine A has been completely overhauled for $9,000 and is expected to last another 12 years. The $9,000 was treated as an expense for tax purposes last year. It can be sold now for $30,000 net after selling expenses, but will not have any salvage value 12 years hence. It was bought new 9 years ago for $54,000 and has been depreciated since then by straight-line depreciation using a 12-year depreciable life. Because less output is now required, Machine A can now be replaced with a smaller Machine B. Machine B costs $42,000, has anticipated life of12 years, and would reduce operating costs $2,500 per year. It would be depreciated by straight-line depreciation with a 12-year depreciable life and no salvage value. Both the income tax and depreciation recapture tax rates are 40%. Compare the after-tax annual cost of the two machines and decide whether Machine A should be retained or replaced by Machine B. Use a 10% after-tax rate of return in the calculations. A. Keep Machine A (defender) B. Replace Machine A with Machine B (the challenger)
Rudy’s stock is currently valued at $28.40 a share. The firm had earnings per share of $1.86 last year and projects earnings of $2.09 a share for next year. What is the trailing twelve month price-earnings ratio?
Big Brothers Inc, borrows 149,623 from the bank at 8.35% compounded annually. This loan is to be repaid in equal annual installments at the end of each year over the next 9 years, How much will the annual payment be?
Use a two-step binomial tree to value a European four-month call option with a strike price of 0.79 and an American four-month call option with the same strike price.
what is the firm's required return?
Bond Prices: Zevon, Inc., has 9 percent coupon bonds on the market that have 8 years left to maturity. The bonds make annual payments. If the YTM on these bonds is 7 percent, what is the current bond price?
A Treasury bond that settles on October 18, 2013, matures on March 30, 2032. The coupon rate is 5.30 percent and the bond has a 4.45 yield to maturity. What are the Macaulay duration and modi?ed duration?
The balance sheet for Ferguson Corp. is shown here in market value terms. There are 5,000 shares of stock outstanding. The company has declared a dividend of $1.30 per share. The stock goes ex dividend tomorrow. Ignoring any tax effects, what is the ..
Find the convexity of a seven-year maturity, 6.6% coupon bond selling at a yield to maturity of 8.4%. The bond pays its coupons annually. (Do not round intermediate calculations. Round your answer to 4 decimal places.) Convexity
The following is a comprehensive problem which encompasses all of the elements learned in previous chapters.
In 2012, an Action Comics No. 1, featuring the first appearance of Superman, was sold at auction for $2,157,000. The comic book was originally sold in 1943 for $.10. For this to have been true, what was the annual increase in the value of the comic b..
Your wealthy uncle established a $1,000 bank account for you when you were born. For the first 8 years of your life, the interest rate earned on the account was 6.7%. Since then, rates have been only 4.7%. Now you are 22 years old and ready to cash i..
1. who might be a good prospect for a private jet? if you were a salesperson for such aircraft how would you go about
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