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QUESTION 1
Jarum Industrial Tools is considering a 3-year project to improve its production efficiency. Buying a new machine press for RM611,000 is estimated to result in RM193,000 in annual pretax cost savings. The press falls in the MACRS five-year class (Table 1), and it will have a salvage value at the end of the project of RM162,000. The press also requires an initial investment in spare parts inventory of RM19,000, along with an additional RM2,000 in inventory for each succeeding year of the project. If the tax rate is 35 percent and the discount rate is 12 percent, should the company buy and install the machine press? Why or why not?Table 1: Modified ACRS depreciation allowances
QUESTION 2
a) Explain the concept of incremental cash flow analysis and its purpose.
b) Explain the difference between a sunk cost and an opportunity cost and give an example of each.
QUESTION 3
Chong Motors just issued 225,000 zero coupon bonds. These bonds mature in 20 years, have a par value of RM1, 000, and have a yield to maturity of 7.45 percent. What is the approximate total amount of money the company raised from issuing these bonds? (Assume semi-annual compounding)
Discuss the primary differences between partnership, sole proprietorship, and corporation forms of business ownership?
On July 1, Pine Region Dairy leased equipment from Farm America for a period of three years. The lease calls for monthly payments of $2,500 payable in advance on the first day of each month, beginning July 1.
You have a commitment to supply 10,000 oz of gold to customer in 3 months time at some specified value and are planning hedging the value risk that you face.
Project A Project BInitial Outlay $100,000 $150,000Useful Life 5 years 5 years Net Present Value 130,000 $140,000If the required rate of return is 12% which project should the company accept?
Assume that Jong used the equity method of accounting for its investment in Nye instead of the cost method. Calculate the balance of its "Investment in Nye" account.
Net Present Value, and internal Rate of Return, should Sally undertake this project - Annual fixed costs are projected at $140,000 per year and variable costs are projected at 50% of sales.
Analysts at Tabby Fur Storage predict that the net present value of a proposed new $10 million warehouse is $1 million. How should these findings be interpreted - the project should be rejected because the NPV is less than the cost of the warehouse..
On June 15, Bunting Company reacquired 12,000 shares of its dollar 10 par value common stock for $18 per share. Bunting uses cost method to account for treasury stock.
Your non-debt liabilities such as accounts payable are forecasted to increase by $10,000. What is your net new financing needed for next year?
Discuss the benefits and limitations of portfolio diversification and explain how risk is assessed and what methods are most appropriate for measuring systematic & unsystematic risks.
How long do you have to pay before the account is overdue? If you take the full period, how much should you remit and calculate cash collections in each year of the four quarters
How much additional financing can be obtained from receivables if Anderson institutes more stringent credit and collection policies and is able to reduce its average collection period to the industry average and calculate the firm's current, quick,..
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