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Lake Bay Shipyard is considering the replacement of an 8-year-old riveting machine with a new one that will increase earnings before depreciation from $24,000 to $54,000 per year. The new machine will cost $87,500, and it will have an estimated life of 8 years and no salvage value. The new machine will be depreciated over its 5-year MACRS recovery period, so the applicable depreciation rates are 20%, 32%, 19%, 12%, 11%, and 6%. The applicable corporate tax rate is 40%, and the firm's WACC is 10%. The old machine has been fully depreciated and has no salvage value. What is the NPV of the project? Round your answer to the nearest cent. Negative amount should be indicated by a minus sign. $ Should the old riveting machine be replaced by the new one?
If you want to value a firm that consistently pays out its earnings as dividends, the simplest model for you to use is the A) enterprise value model. B) Method of comparables. C) dividend-discount model. D) Discounted free cash flow model.
What would happen to the NPV of the above project if the inflation rate were expected to be 4.5 percent in each of the next four years?
Discuss in your own words what are ethics in corporate finance and what are the consequences of unethical behavior?
What concepts must the professional financial planner balance in order to create a successful financial plan?
You are willing to pay $15,625 to purchase a perpetuity that will pay you and your heirs $1,250 each year, forever. If your required rate of return does not change, how much would you be willing to pay if this were a 20-year annual payment, ordinary ..
The current market price of the bond is $988 and the current yield is 7.8%. What is the conversion ratio?
Which of the following distributions from a profit-sharing plan would be subject to the 10% early withdrawal penalty,
These bonds carry a coupon rate of 8.25%, make semi-annual payments, mature in 11 years, and have a par value is $1,000. What’s the annual YTM on these bonds?
Suppose Visa Inc.? (V) has no debt and an equity cost of capital of 9.2 %. The average debt-to-value ratio for the credit services industry is 13.2%.
What is the nominal annual percentage cost of its non-free trade credit, based on a 365-day year?
Assuming that the project will be financed at targeted debt-to-equity ratio, should the company invest in the project?
In 2009, Mr. Smith purchased a principal residence for $1,500,000. He made a down payment of $300,000 and financed the remainder by borrowing $1,200,000 through a loan secured by the residence. In 2009, Mr. Smith paid interest that accrued on the ind..
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