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A highway contractor is considering buying a new trench excavator that costs $300,000 and can dig a 3-foot-wide trench at the rate of 16 feet per hour. The annual number of feet to dig each year is 6,400. With the machine adequately maintained, its production rate will remain constant for the first three years of operation and then decrease by 2 feet per hour for each additional year. The maintenance and operating costs will be $50 per hour. The contractor will depreciate the equipment with a five-year MACRS. At the end of five years, the excavator will be sold for $75,000. The contractor will earn an additional annual revenue of $100,000 with this new machine. Assuming the contractor’s marginal tax rate is 38% per year, determine the annual after-tax net cash flow. Is the new trench excavator a good investment if the company’s MARR is 15%?
You have an outstanding student loan with required payments of $600 per month for the next four years. The interest rate on the loan is 9% APR (compounded monthly). Now that you realize your best investment is to prepay your student loan, you decide ..
Gateway Communications is considering a project with an initial fixed asset cost of $2.872 million which will be depreciated straight-line to a zero book value over the 10-year life of the project. At the end of the project the equipment will be sold..
Find the net present value (NPV) for the following series of future cash flows, assuming the company’s cost of capital is 10.19 percent. The initial outlay is $471,448.
Discussion surface area and volume play a role in marketing products, such as advantages and disadvantages. Give specific examples and include related information when appropriate, such as surface area, lateral area, cross section, etc.
Kandy Corporation is considering a replacement investment. The machine currently in use was originally purchased two years ago for $65,000. Tax-allowable depreciation is $13,000 per year for five years.
If a firm pays a $2 dividend and that is expected to remain constant, what is the value of the common stock, if the firm’s required rate of return is 16%?
B2B, Inc., has a capital structure of 36 percent equity, 16 percent preferred stock, and 48 percent debt. Assume the before-tax component costs of equity, preferred stock, and debt are 14.5 percent, 11.0 percent, and 9.5 percent, respectively. What i..
What additional assumptions (to the main three) are important when applying the CAPM and what are the underlying strengths and weaknesses of this application? Discuss the reliability of the model and give examples in your explanation.
A firm's sales are $10,000,000 and net income is $1,000,000, the total asset turnover, TAT, is 2 times. The firm is 100% equity financed! What are total assets? (use TAT formula)
In general, a capital-abundant country (such as the United States) tends to specialize in capital-intensive industry and export capital-intensive products, and import labor-intensive products. The last step of the possible integration forms is the. T..
Describe the structured interview. What are the characteristics of structured interviews that improve on the shortcomings of unstructured interviews? Develop one original situational question and an accompanying rating scale using benchmark responses..
Fort Smith Drywall expects sales next year to be $600,000 if the economy is strong, $500,000 if the economy is steady, and $300,000 if the economy is weak. The owner believes the probability of a strong economy is 20%, the probability of a steady eco..
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