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You must evaluate the purchase of a proposed spectrometer for the R&D department. The base price is $140,000, and it would cost another $30,000 to modify the equipment for special use by the firm. The equipment falls into the MACRS 3-year class and would be sold after 3 years for $60,000. The applicable depreciation rates are 33%, 45%, 15%, and 7%, as discussed in Appendix 12A. The equipment would require an $8,000 increase in net operating working capital (spare parts inventory). The project would have no effect on revenues, but it should save the firm $50,000 per year in before-tax labor costs. The firm’s marginal federal-plus-state tax rate is 40%.
1: What is the operating cash flow for year 3?
2: What is the terminal cash flow for year 3?
3: What is the projects NPV?
4: What is the IRR
5: What is the MIRR?
How important is it that an organization have an exclusive right to exercise a real option? That is, can we really say that an option being considered has value if competitors may exercise it also?
Bond P is a premium bond with a coupon rate of 8.4 percent. Bond D is a discount bond with a coupon rate of 4.4 percent. Both bonds make annual payments, have a YTM of 6.4 percent, and have nine years to maturity. What is the current yield for bond P..
Prepare a balance sheet in good form using the information given below. Make sure to identify current assets, net fixed assets, total assets, current liabilities, long-term debt, total equity, and total liabilities and equity. Gross fixed assets $45,..
Assume that k* = 1.5; the maturity risk premium is found as MRP=0.09(t-1) where t= years to maturity; the default risk premium for Corporate bonds is found as DRP= 0.11% (t-1); the liquidity premium is 0.8; and inflation is expected to be 2% in years..
The real risk-free rate is 3%, and inflation is expected to be 2.5% for the next 2 years. A 2-year Treasury security yields 8.75%. What is the maturity risk premium for the 2-year security?
genesisrsquo newly established operations management team decided to seek outside assistance in developing a long-term
Assume that you will inherit a $1 million trust fund from your family when you turn 21 next year.- Explain in detail how you can use futures or options to alleviate your fears.
Which of the following four investments has the highest PV? (Assume your required rate of return is 5% annually)
Which combination of compound options has a payoff equal to a standard put?
calculate monthly return for AAP and the S&P using the adjusted end of month prices. calculate beta for AAPL using S&P 500 returns as your market index. calculate the proportion of total risk (variance) in the returns for AAPL that is systematic and ..
Portfolio Expected Return. You own a portfolio that is 20 percent invested in Stock X, 45 percent in Stock Y, and 35 percent in Stock Z. The expected returns on these three stocks are 10 percent, 14 percent, and 16 percent, respectively. What is the ..
The value of a share of common stock depends on the cash flows it is expected to provide, and those flows consist of the dividends the investor receives each year while holding the stock and the price the investor receives when the stock is sold. Car..
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