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A manufacturing company invests $100,000 in a new piece of equipment. Operating expenses for this new piece of equipment is estimated to be $4,000 starting EOY1 and increasing by $200 per year at the EOY2 and for the next 9 additional years. Additional revenues after placing this piece of equipment in-service are projected to be $20,000 the first year (EOY01) and remaining constant for 4 additional years. After that, additional revenue is expected to increase to $22,000 at EOY6 and increase at the rate of $100 per year from EOY7 through EOY10. At the end of 10 years the piece of equipment will be sold for $10,000. The nominal rate of interest for all years is 12%.
a. Draw a cash flow diagram from the company's perspective. (Neatness and accuracy count)
b. What is the present value dollars for all cash flows? (Move all dollars to time=O)
c. What is the uniform series of cash flows for years 1 through 10 that is equivalent to all the cash flows over the ten year period?
If the actual February 28 A/R balance was $12,000 and projected sales in March are $50,000, where 70% of sales are on credit, 60% of credit sales are collected in the month of the sale, and 40% are collected in the month after the sale, what is the p..
Phone Home, Inc. is considering a new 6-year expansion project that requires an initial fixed asset investment of $5.994 million. The fixed assets fall into a 5-year MACRS category, and it is expected that the assets will have no salvage value at the..
Barnes’ Brothers has the following data for the year ending 12/31/10: Net income = $600; Net operating profit after taxes (NOPAT) = $700; Total assets = $2,500; Short-term investments = $200; Stockholders' equity = $1,800; Total debt = $700; and Tota..
Find the future value of the following annuities. The first payment in these annuities is made at the end of Year 1; that is, they are ordinary annuities. Round your answers to the nearest cent.
The process engineer at Strow bridge Metal works has the choice of machining a particular part on either of two machines. Orders for this part re received regularly, but the order size varies.. When the order is processed on machine A, four sequentia..
A preferred stock would be an ideal example of: Cash flows associated with annuities are considered to be:
What is the company's Foreign Exchange (FX) Risk Management Policy? Is centralized or decentralized
A project will generate $1 million net cash flow annually in perpetuity. If the project costs $7 million, what is the lowest WACC shown below that will make the NPV negative? A-10% B-12% C-14% D-16%
How can currency futures be used by corporations? How can currency futures be used by speculators? Forward versus futures contracts. Compare and contrast forward and futures contracts.
Fama’s Llamas has a WACC of 10.9 percent. The company’s cost of equity is 14.4 percent, and its cost of debt is 8.3 percent. The tax rate is 38 percent. What is Fama’s target debt-equity ratio?
Cavo Corporation expects an EBIT of $26,550 every year forever. The company currently has no debt, and its cost of equity is 14 percent. The corporate tax rate is 35 percent. A What is the current value of the company? What will the value of the firm..
Winston Enterprises would like to buy some additional land and build a new factory. The anticipated total cost is $148.17 million. The owner of the firm is quite conservative and will only do this when the company has sufficient funds to pay cash for..
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