Decided to acquire new weather satellite

Assignment Help Financial Management

Reference no: EM132032652

1. A small stock dividend:

A. Increases common stock account by the market price of each share issued.

B. Reduces retained earnings by the market price of each share issued.

C. Reduces cash by the total market value of the shares issued.

D. Does not affect the capital surplus account.

2. Jupiter Inc. has decided to acquire a new weather satellite. After considering several options it has narrowed its search to two satellites.

Satellite XPTO: purchase cost of $306251 and operating costs of $39998 per year (paid at the end of each year).

Satellite XYZ: purchase cost of $205569 and operating costs of $55860 per year (paid at the end of each year).

Both satellites have a service life of 10 years. Based on the defender-challenger approach and given that the MARR is 4%, reinvestment rate is 9%, and minimum external rate of return is 10%, compute the incremental external rate of return of choosing the most expensive satellite.

PLEASE NO EXCEL CALCULATIONS, INCLUDE STEPS AND FORMULAS.

Reference no: EM132032652

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