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Machine A was purchased three years ago for $38,000 and had an estimated MV of $4,000 at the end of its 10-year life. Annual operating costs are $3, 200. The machine will perform satisfactorily for the next seven years. A salesperson for another company is offering Machine B for $40,000 with an MV of $7, 500 after 10 years. Annual operating costs will be $2, 700. Machine A could be sold now for $30,000, and MARR is 15% per year. Compare the before-tax equivalent uniform annual cost, EUAC, of the defender (keeping Machine A) to the challenger (buying Machine B). To answer this problem, calculate the value of the difference in annual costs: EUAC(challenger) - EUAC(defender) = EUAC (Machine B) - EUAC(Machine A). (Enter your answer as a number without the dollar $ sign.)
Finance text books normally discuss many different financial ratios. Such as liquidity ratios and the rest. What is their purpose? Can any ratio or combination of ratios predict a company's long-term viability? Can you think of an example whereby o..
Stock market indexes allow us to measure the average performance of a national market. US Dow Jones Industrial Average Index is a good proxy of a foreign stock market performance. Investing in foreign firms thru ADRs is usually cheaper than a direct ..
In a multiproduct reorder point subject to an aggregate service constraint, what will be the effect of increasing the cost of one of the parts on the fill rate of the part? On the fill rates of the other parts? How is demand management practiced in M..
The price of a 5-year semannual-coupon bond is $$131.5184. Its duration and convexity are 4.3476 and 20.5562, respectively. If interest rates go up by 1%, what will be the dollar change in the price of this bond using both duration and convexity to e..
Happy Enterprises currently has an operating cycle of 62 days. The firm is analyzing some operational changes, which are expected to increase the accounts receivable period by 2 days and decrease the inventory period by 5 days. The accounts payable t..
You purchase a car that costs $25,000 complete (title, license, etc.). Your bank loans you the $25,000, and in return you must make monthly payments of $484.00 per month for five years (60 payments). Based on these data, what monthly interest rate is..
A project has an initial cost of $41,125, expected net cash inflows of $12,000 per year for 9 years, and a cost of capital of 14%. What is the project's NPV? (Hint: Begin by constructing a time line.) Do not round your intermediate calculations. Roun..
Suppose that a health care organization had revenues of $300,000 for March and that the payer mix is as follows: PAYER PERCENT OF PATIENTS PAYMENT LAG Medicare 40 3 months Medicaid 20 3 months Blue Cross 15 2 months Other insurer 15 1 month Self-pay ..
What does this information suggest about the degree of risk aversion of the average investor.
Jasper Metals is considering installing a new molding machine which is expected to produce operating cash flows of $73,000 a year for 7 years. At the beginning of the project, inventory will decrease by $16,000, accounts receivables will increase by ..
Describe elements which can commonly cause uncertainty in the cash budget for an enterprise and the rationale for each. If you are the CFO of a company, what techniques would you use to cope with this uncertainty? How might this change in a very larg..
A company is 38% financed by risk-free debt. The interest rate is 11%, the expected market risk premium is 9%, and the beta of the company’s common stock is 0.61. What is the company cost of capital? What is the after-tax WACC, assuming that the comp..
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