Considering replacing existing press

Assignment Help Financial Management
Reference no: EM131878515

The washington post is considering replacing an existing press with a more efficient press. The new press cost $55000 and requires $5000 in installation costs. The old press was purchased 9 years ago for an installed cost of $45000 and can be sold for $20000 net of any removal costs today. Both presses are depreciated under the MACRS 5 year recovery schedule. The firm has a 35% marginal tax rate. The new press requires $5000 less in inventory kept on handing during the project and will reduce expenses by $19000 in each year(not cumulative) of operation,with no change to expected revenues. Both presses could operate for 3 more years before needing to be replaced, in 3 years neither press will have any salvage value and the newspaper expects tp stop all print publication due to increased internet usage at that time. If the firms WACC is 11% should they replace the press.

Reference no: EM131878515

Questions Cloud

What is the bond nominal yield to maturity : What is the bond's nominal yield to maturity? Would an investor be more likely to earn the YTM or the YTC?
You repay the loan by making three annual payments : You borrowed some money at 8 percent per annum. You repay the loan by making three annual payments of $ 118
Compute the present value of annuity : Compute the present value of an annuity of $ 884 per year for 20 years, given a discount rate of 9 percent per annum.
How much money will be deposit in the account : Assume that you deposit $ 2,069 into an account that pays 11 percent per annum. How much money will be in the account 24 years from today?
Considering replacing existing press : The washington post is considering replacing an existing press with a more efficient press. If the firms WACC is 11% should they replace the press.
What are the option market value and the price of the stock : The exercise price on one of Flanagan Company's options is $15 and its time value is $7. What are option's market value and price of the stock?
Benefit from unrelated diversification : Discuss how firms can benefit from (1) related diversification and also can benefit from (2) unrelated diversification.
Performance stock options to key executives : LCI Cable Company grants 1.1 million performance stock options to key executives at January 1, 2016. The options have a current fair value of $20 per option.
Compute the present value of perpetuity : Compute the present value of a perpetuity that pays $ 14,757 annually given a required rate of return of 8 percent per annum.

Reviews

Write a Review

Financial Management Questions & Answers

  How much of his first payment will be applied to interest

Your uncle borrows $57,000 from the bank at 11 percent interest over the nine-year life of the loan. How much of his first payment will be applied to interest?

  Operating leverage at financial break-even level of output

A project has the following estimated data: price = $54 per unit; variable costs = $36 per unit; fixed costs = $19, 300; required return = 12 percent; initial investment = $26, 800; life = four years. Ignoring the effect of taxes, what is the account..

  Calculate the total return on your investment

You purchased one of Big Corp.’s 8%, 10-year convertible bonds at its $1,000 par value a year ago when the company’s common stock was selling for $20. Similar bonds without a conversion feature returned 12% at the time. The bond is convertible into s..

  Provide an accept-reject decision for capital budgeting tool

Using the above cash flows, calculate the following for each project. Assume a 11% required return a. NPV b. Payback Period c. Discounted Payback Period d. IRR e. MIRR. Assuming independent projects, provide an accept/reject decision for each capital..

  What incremental free cash flows should be included

what incremental free cash flows should be included to account for the need to accelerate the purchase of the tank? cars?

  Provide a linear programming model formulation only

Show & Sell is interested in finding the optimum allocation of the budget to radio and TV advertising. Provide a linear programming model formulation only; you do not need to identify an optimal solution.

  Calculate number of futures contracts required for a hedge

Consider a U. S. firm with receivables of BRL 500,000 in 25 days. It hedges this position using a CME BRL futures contract maturing in 45 days. A financial analyst notes that the BRL futures contract tends to change by USD 0.0066 in response to a USD..

  Why or why not a callable bond trading at a premium price

Discuss why or why not a callable bond trading at a premium price would be an appropriate investment for the target audience's organizations.

  Relationship between bond value and interest rate changes

Discuss the relationship between bond value and interest rate changes. What effect do interest rate changes have on bond values on the secondary markets? As the maturity date on a bond approaches what happens to the effect, on bond value, of interest..

  Compute annualized rate of return earned by fluffy finance

Compute the annualized rate of return earned by Fluffy Finance on the loan?

  Additional net working capital investments each year

Net working capital is 1,500,000; additional net working capital investments each year (starting in year 1) equal to 15% of the projected sales increase for the following year. Decreases in sales will result in recovery of net working capital equal t..

  Bond is interest rate you earn on your investment

The YTM on a bond is the interest rate you earn on your investment if interest rates don’t change. If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY). (A) Suppose that today you buy a bond..

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