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Suppose you need to decide whether to keep a machine or replace it with a new one: Old machine: Old machine can operate for 5 years with revenue and operating cost of $280,000 and $200,000 per year (from year 1 to year 5). New machine: Replacing old machine with new one that requires capital cost of $600,000 in year zero (zero salvage value for old machine). Capital cost is depreciable from year 0 to year 7 (over eight years) based on MACRS 7-year life depreciation with the half year convention (table A-1 at IRS). New machine can produce income of $350,000 at lower operating cost of $160,000 per year for 7 years (from year 1 to year 7). New machine will have zero salvage value at the end of year 7. Consider income tax of 35% and minimum rate of return 8%. Construct incremental analysis and conclude which alternative is more economically satisfactory? Please show your work.
Compare the stated annual rate (r) to the effective annual rate (EAR). What relationship exists between compounding frequency and the stated and effective annual rates?
You are evaluating a project for ‘The Ultimate’ recreational tennis racket, guaranteed to correct a wimpy backhand. You estimate the sales price of ‘The Ultimate’ to be $200 and sales volume to be 1,500 units the 1st year, 2,250 units the 2nd year an..
A firm does not pay a dividend. It is expected to pay its first dividend of $0.10 per share in three years. This dividend will grow at 8 percent indefinitely.
Robert deposits $1475.00 in an account on April 1, 2019 which earns 7.5% compounded quarterly. How much is in the account on September 15, 2024 if simple interest is allowed for part of a conversion period?
Company has an Un levered beta of 1.1. Financed with 50% debt and levered beta of 1.6. If the risk free rate is 5.5% and the market risk premium is 5% how much is the additional premium that shareholders are required to be compensated for financial r..
Jefferson Products, Inc., is considering purchasing a new automatic press brake, which costs $300,000 including installation and shipping. - Calculate the press brake's net present value.
A stock has had returns of -26 percent, 6 percent, 34 percent, -5 percent, 28 percent, and 19 percent over the last six years. What are the arithmetic and geometric returns for the stock?
Calculate how much domestic producers gain or lose from the quota. - Calculate how much domestic consumers gain or lose from the quota.
Murphy Company's total liabilities on December 31, 2014, amounted to $1,501,500. The debt-to-equity ratio on this date was 1.43 to 1. Net income for 2014 was $250,920, and the profit margin was 5.10%. Determine Murphy's total assets on December 31, ..
Shelton Company has a debt−equity ratio of 1.40. Return on assets is 7.65 percent, and total equity is $700,000. What is the equity multiplier? What is the return on equity?
Compute the annual interest payments and principal amount for a Treasury Inflation-Protected Security with a par value of $1,000 and a 3-percent interest rate if inflation is 4 percent in year 1, 5 percent in year 2, and 6 percent in year 3.
Explain how "relative valuation" works and What are the primary steps involved in conducting comparable valuations? Give some examples of common valuation "multiples" used.
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