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You have been asked by the president of your company to evaluate the proposed acquisition of a new spectrometer for the firm's R&D department. The equipment's basic price is $70,000 and it would cost another $15,000 to modify it for special use by your firm. The spectrometer, which has a MACRS 3-year recovery period, would be sold after 3 years for $30,000. Use of the equipment would require an increase in net working capital (spare parts inventory) of $4,000. The spectrometer would have no effect on revenues, but it is expected to save the firm $25,000 per year in before-tax operating costs, mainly labor. The firm's marginal tax rate is 40 percent. If the project's cost of capital is 10 percent, should the firm purchase the spectrometer? Answer based on (i) the NPV, (ii) the IRR, (iii) the profitability index, and (iv) the payback rule (your firm accepts projects with a payback of 3 years or less).
Jill purchased a piece of real estate one year ago for $620,000. The real estate is now worth $650,000. If Jill needs to have a total return of 11.1 per cent
what is the present value of 1000 to be received at the end of one year if it must provide a return of 5? what is the
If in five years you sell 200 bags of cat chow, what would be your revenue in real terms? What is the nominal interest rate? what is the present value of this revenue?
The impact of unethical behavior can have a long term effect on any company's operation. Saint Leo's core values are Excellence, Community, Respect.
They have 8 years to maturity and a face value of $1,000. Compute the value of MOLL's bonds if investors' required rate of return is 10%.
• Provide two examples that describe an increase or change in your own theories of international finance since the beginning of this course.
Discuss the importance of budgets for an organization or department. Explain the basic concept of free cash flow
You are offered an investment with returns of $ 1,790 in year 1, $ 4,676 in year 2, and $ 5,525 in year 3. The investment will cost you $ 5,919 today. If the appropriate Cost of Capital (quoted interest rate) is 6.8 %, what is the Profitability In..
Please discuss cost of capital with examples of any news or other
20 years ago, Company A issued 30-year bonds with a face value of $1,000 each. Today, the market rate of return on these bonds is 6.9 percent and the market price is $945. The bonds pay interest annually. What is the coupon rate?
The Christie Corporation is trying to determine the effect of its inventory turnover ratio and days sales outstanding(DSO) on its cash flow cycle. Christie's sales last year(on all credit)were $150,000,and it earned a net profit of 6%, or$9,000. I..
The beta of a well-diversified portfolio on the factor is 1.1. The variance of returns on the well-diversified portfolio is approximately _____.
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