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"A highway contractor is considering buying a new trench excavator that costs $321,000 and can dig a 3-foot-wide trench at the rate of 25 feet per hour. The annual number of feet to dig each year is 5,100. The machine's production rate will remain constant for the first 4 years of the operation and then decrease by 4 feet per hour for each additional year. The maintenance and operating costs will be $67 per hour. The contractor will depreciate the equipment with a five-year MACRS. At the end of 5 years, the excavator can be sold for $73,000. The contractor will earn an additional annual revenue of $118,000 with this new machine. Assuming the contractor's tax rate is 35% per year, determine the net present worth of the cash flow from this machine. The company's MARR is 10%."
What is the ATCF for the fourth year of service of the asset. What is the EVA for year 4 if their after tax MARR is 7%
Which of the following will increase the present value of an annuity?
Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next nine years because the firm needs to plow back its earnings to fuel growth. The company will pay a $4.25 per share dividend 10 years from toda..
PNC’s target capital structure calls for 15% debt, 2% preferred stock, and 83% com- mon equity, all taken at market value. Assuming that new capital is raised in these percent- ages and that all common equity is raised as retained earnings, what is P..
What is the required rate of return on this stock? That is, solve for r.
The shareholders of the Pickwick Paper Company need to elect eight directors. There are 200,000 shares outstanding. What is the minimum number of shares you need to own to ensure that you can elect at least one director if the company has majority vo..
Pappy’s Potato has come up with a new product, the Potato Pet (they are freeze-dried to last longer). Pappy’s paid $132,000 for a marketing survey to determine the viability of the product. The equipment necessary for production of the Potato Pet wil..
What is the net present value of this proposed asset investment? What are the operating cash flows in Years 1 through 4?
Your employer, a mid-sized human resources management company, is considering expansion into related fields, including the acquisition of Temp Force Company, an employment agency that supplies word processor operators and computer programmers to busi..
Your firm is considering leasing a new computer. The lease lasts for 9 years. The lease calls for 10 payments of $1,000 per year with the first payment occurring immediately. The computer would cost $7,650 to buy and would be straight-line depreciate..
A multinational corporation is about to embark on a major financial restructuring program. One critical stage will be the issuance of seven-year Eurobonds sometime within the next month. Describe the nature of the basis risk in the hedge. In particul..
This statement from the 10-K filed by Bear Stearns for the Fiscal year 2007 indicates that management was aware that the firm was exposed to a run by other banks. “An inability to raise money in the long-term or short-term debt markets, or to engage ..
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