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You must evaluate the purchase of a proposed spectrometer for the R&D department. The base price is $230,000, and it would cost another $34,500 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 $69,000. The applicable depreciation rates are 33%, 45%, 15%, and 7%. The equipment would require a $13,000 increase in net operating working capital (spare parts inventory). The project would have no effect on revenues, but it should save the firm $28,000 per year in before-tax labor costs. The firm's marginal federal-plus-state tax rate is 40%. What is the initial investment outlay for the spectrometer, that is, what is the Year 0 project cash flow? Round your answer to the nearest cent. Negative amount should be indicated by a minus sign. $ 264,500 What are the project's annual cash flows in Years 1, 2, and 3? Round your answers to the nearest cent. In Year 1 $ In Year 2 $ In Year 3 $ If the WACC is 13%, should the spectrometer be purchased?
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The IRR of this investment opportunity is. What does the IRR rule say about whether you should? invest?
What is the major advantage of primary data collection, compared to the use of secondary data?
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You want to quit your job and go back to school for a law degree 4 years from now, and you plan to save $3,500 per year, starting one year from now. You will make 4 deposits in an account that pays 5.7% interest. Under these assumptions, how much wil..
Identify the different types of financial markets and financial institutions, and explain how these markets and institutions enhance capital allocation. Explain how the stock market operates, and list the distinctions between the different types of s..
Assume a clinical laboratory is considering a new test. Here are the key assumptions: annual fixed direct costs = $20,000, annual overhead allocation = $10,000, variable cost per test = $5, and expected volume = 5,000 tests. What price should be set ..
Calculate the volatility of a portfolio that consists of a long position of $8,500 in Johnson & Johnson and a short position of $1,000 in Walgreens.
Enterprise Storage Company has 520,000 shares of cumulative preferred stock outstanding, Compute the value of the common stock.
If the term of the instrument is 88 days, what are the bond equivalent and discount yields on this investment?
Suppose the interest parity condition holds. what are the assumptions for financial investors we must have? Discuss.
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