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Your company, Dawgs "R" Us, is evaluating a new project involving the purchase of a new oven to bake your hot dog buns. If purchased, the new oven will replace your existing oven, which was purchased seven years ago for a total installed price of $1 million.You have been depreciating the old oven on a straight-line basis over its expected life of 15 years to an ending book value of $250,000, even though you expect it to be worthless at the end of that 15-year period. The new oven will cost $2 million and will fall into the MACRS 5-year depreciation class life. If you purchase the new oven, you expect it to last for eight years. At the end of those eight years, you expect to be able to sell it for $100,000. Note that both of the ovens,old and new, therefore have an effective remaining life of eight years at the time of your analysis. If you do purchase the new oven, you estimate that you can sell the old one for its current book value at the same time.The advantages of the new oven are twofold: Not only do you expect it to reduce the before-tax costs on your current baking operations by $75,000 per year, but you will also be able to produce new types of buns. The sales of the new buns are expected to bring your company $200,000 per year throughout the eight-year life of the new oven, while associated costs of the new buns are only expected to be $80,000 per year.Since the new oven will allow you to sell these new products, you anticipate that NWC will have to increase immediately by $20,000 upon purchase of the new oven. It will then remain at that increased level throughout the life of the new oven to sustain the new, higher level of operations.Your company uses a required rate of return of 12 percent for such projects, and your incremental tax rate is 34 percent. What will be the total cash flows for this project?
assume that a company records purchases net of discount. if the company bought merchandise valued at 10000 on credit
Healthy Foods Inc. sells 40-pound bags of grapes to the military for $15 a bag. The fixed costs of this operation are $91,000, while the variable costs of grapes are $.20 per pound.
At what discount rate would you be indifferent between accepting the project and rejecting it?
The exercise price on one of ORNE Corporation's call options is $35 and the price of the underlying stock is $34. The option will expire in 55 days. The option is currently selling for $0.25.
A new after-school delinquency prevention program is being established. The Program Director calls you up on the telephone and asks your advice on how to design a good program. What advice can you give her?
All net working capital will be recouped when the project terminates. What is the cash flow related to the net working capital for the last year of the project?
hampton corp. is considering two mutually exclusive projects. both require an initial investment of 10000 at t0.
Distinguish data from information and describe the characteristics used to evaluate the quality of data.
air jet best parts inc. would like to issue 20-year bonds to obtain remaining funds for the new mexico plant. the
At the beginning of the year, a firm has current assets of $323 and current liabilities of $227. At the end of the year, the current assets are $483 and the current liabilities are $267. What is the change in net working capital?
Compute of after-tax profit and The corporate tax rate is 40%. If the economy is strong the firm will sell 2,000,000 gadgets
moje inc. manufactures travel locks. the budgeted selling price is 19 per lock the variable cost is 8 per lock and
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