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Looner Industries is currently analyzing the purchase of a new machine that costs $160,000 and requires $20,000 in installation costs. Purchase of this machine is expected to result in an increase in net working capital of $30,000 to support the expanded level of operations. The firm plans to depreciate the machine under MACRS using a 5-year recovery period and expects to sell the machine to net $10,000 before taxes at the end of its usable life. The firm is subject to a 40% tax rate.a. Calculate the terminal cash flow for a usable life of (1) 3 years, (2) 5 years, and (3) 7 years.b. Discuss the effect of usable life on terminal cash flows using your findings in part a.c. Assuming a 5-year usable life, calculate the terminal cash flow if the machine were sold to net (1) $9,000 or (2) $170,000 (before taxes) at the end of 5 years.d. Discuss the effect of sale price on terminal cash flow using your findings in part c.
A company paid a dividend of 1.80 per share but the dividend is expected to increase to 4 percent per year. The risk free rate is 6% and the market risk premium is 5 percent.
in an effort to capure the large jet market wright brothers aviation invested 28 billion developing its 1903a which is
Susan Lussier is 35 years old and employed as a tax accountant for major oil and gas Exploration Company. She earns nearly $135,000 a year from her salary and from participation in the company's drilling activities.
Computation of internal rate of return of the bond and what was your internal rate of return
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acitelli corporation which applies manufacturing overhead on the basis of machine-hours has provided the following data
What are the characteristics of standard normal distribution? The HR department of an organization collects data on employees: age, salary, level of education, gender, and ethnicity. Which data do you think is more likely to follow normal distribu..
Paul has promised to pay Lucy $25,500 in seven years if she gives him $10,000 today. What discount rate is Paul using?
Supposing a 40% tax rate, compute the earnings per share data which should appear on the financial statements of Bio Industries as of December 31, 2010.
You have just won a lottery! You will receive $50,000 a year beginning one year from now for 20 years. If your required rate of return is 10%, what is the present value of your winning lottery ticket?
What is the weighted average cost of capital WACC
Find the risk-neutral martingale measure P* using the normalization by risk-free borrowing and lending.Calculate the value of the option under the risk-neutral martingale measure using Ct = 1 / 1 +rΔ EP*[Ct+Δ]
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