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The PARC Company, a large profitable corporation, has decided to purchase a new widget machine. The following cost data concerning the widget machine have been provided. First cost = $3,156,000. Salvage value = $119,000. Life = 10 Years. Annual benefits = $885,000. Annual OM&R Costs = $97,700. PARC has been advised to consider at least two separate alternatives:
1) Direct purchase the machine with internally generated funds. Under these conditions, PARC uses MACRS depreciation method for capital recovery. This particular project has a depreciation life of six years. PARC uses a MARR of 12% for all analysis.
2) PARC can decide to take out a loan for 35% of the first cost. The loan will have an interest rate of 12% and consists of eight annual payments. All other considerations are the same as in 1) above.
Calculate the Project and Equity Free Cash Flows for the following scenario. We want to finance a project with 30% debt (70% equity). We expect $1,000,000 in sales for next year; Hint: to determine the EFCF, you will need to determine the value of th..
Which journal entry reflects the adjusting entry needed on December 31?: In November, BOC prepaid $30,000 of rent for December, January, and February (and it was recorded properly). Now, it is December 31, the end of the fiscal year. In September, BO..
The total book value of WTC’s equity is $10 million, and book value per share is $20. The stock has a market-to-book ratio of 1.5, and the cost of equity is 15%. The firm’s bonds have a face value of $5 million and sell at a price of 110% of face val..
An investment will provide you with $100 at the end of each year for the next 10 years. What is the present value of that annuity if the discount rate is 8% annually? What is the present value of the above if the payments are received at the beginnin..
Kose, Inc., has a target debt-equity ratio of 0.76. Its WACC is 11 percent, and the tax rate is 33 percent. Requirement 1: If Kose’s cost of equity is 15 percent, what is its pretax cost of debt? If instead you know that the aftertax cost of debt is ..
Discuss the three major components of a national health policy sturural determinant of good health life style determinants and socializing and empowering determinants and what are the influential health programs that target these determinants?
Barton Industries expects next year's annual dividend, D1, to be $2.50 and it expects dividends to grow at a constant rate g = 4.1%. The firm's current common stock price, P0, is $22.10. What is the cost of new common equity considering the estimate ..
If a firm just paid a dividend of $3.00 and you require a return of 13% for the risk perceived for the investment, what price would you pay for the stock if you expect the growth rate of dividends to be 10% for the next five years and then 5% thereaf..
Storico Co. just paid a dividend of $1.90 per share. The company will increase its dividend by 20 percent next year and will then reduce its dividend growth rate by 5 percentage points per year until it reaches the industry average of 5 percent divid..
Discuss the ways in which a physician office practice can optimize its financial condition and benefit its hospital partner.
Discuss the difference between substitutes and complements and the difference between normal goods and inferior goods. How do managers and business owners use these concepts? Please provide real world examples.
Bond J is a 7 percent coupon bond. Bond K is a 13 percent coupon bond. Both bonds have 20 years to maturity, make semiannual payments, and have a YTM of 10 percent. If interest rates suddenly rise by 2 percent, what is the percentage price change of ..
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