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Lang Industrial Systems Company (LISC) is trying to decide between two different conveyor belt systems. System A costs $252,000, has a four-year life, and requires $78,000 in pretax annual operating costs. System B costs $354,000, has a six-year life, and requires $72,000 in pretax annual operating costs. Both systems are to be depreciated straight-line to zero over their lives and will have zero salvage value. Whichever project is chosen, it will not be replaced when it wears out. The tax rate is 34 percent and the discount rate is 8 percent. Calculate the NPV for both conveyor belt systems.
Puckett Products is planning for $4.7 million in capital expenditures next year. Puckett's target capital structure consists of 60% debt and 40% equity. If net income next year is $2.5 million and Puckett follows a residual distribution policy with a..
Santa Cruz community hospital is considering investing $90,000 in new laundry equipment to replace its present equipment, which is completely depreciated and outmoded. Salvage value of the present equipment is expected to be zero. Assuming that Santa..
The NOI is $40,000; there are $5,000 in tenant improvement expenditures paid for by the landlord; What is the Equity After-Tax Cash Flow (EATCF)??
Your firm is considering a project with the estimated cash flows as shown below. Find the MIRR for the project. The firm's cost of capital = 12.7% and the project's RRR = 10.9%. Notice that year 0 and year 6 cash flows are negative.
Today is January 1, 2012 and you are considering purchasing an outstanding bond that was issued on January 1, 2010.
Project Alpha has an internal rate of return (IRR) of 15 percent. Project Beta has an IRR of 14 percent. Both projects have a required return of 12 percent.
The factory for the week is $200,000, consisting of $140,000 earned by 100 direct laborers and $60,000 earned by 30 indirect laborers. The total of the factory bonuses to be received at year-end is estimated at $400,000. Prepare the entry to distribu..
Search the internet to find the monthly stock price in 2015 for the S&P 500, Wal-Mart and Target. Put a table together with information and also state your source of information (URL used). Then calculate the average monthly holding-period returns an..
Consider a Zerobond (i.e., a bond that pays no coupon payment, meaning that the coupon rate on the bond is 0%) with a par value of $1,000 that will mature exactly 12 years from today. The current YTM of this Zerobond is 5.2%. Two years ago the YTM of..
Calculate the expected return and standard deviation (square root of the variance) of the following probability distribution of returns 10% probability of 25% return 65% probability of 10% return 20% probability of -5% return 5% probability of -30% r..
A student bought a $75 used guitar today and agreed to pay for it $85 six months later. Assuming semi-annual (every six months) compounding, what is the nominal annual interest rate? What is the effective annual interest rate?
Your firm has an average collection period of 23 days. Current practice is to factor all receivables immediately at a discount of 1.3 percent. What is the effective cost of borrowing in this case?
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