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A company is considering replacing an old piece of equipment that is completely depreciated. One possible replacement (machine #1) has a cost of $190,000, an expected 3-year life, and positive after-tax cash flows of $87,000 per year. The other replacement (machine #2) being considered has a cost of $360,000, an expected 6-year life and positive after-tax cash flows of $98,300 per year. Assume that the company's WACC is 14%. Use a calculator and show keystrokes used.
Question 1: Find the NPV of each machine.Question 2: Using the replacement chain approach, find the extended NPV of machine.Question 3: Using the equivalent annual annuity (EAA) approach, find the EAA of each machine.Question 4: Assuming that both projects can be repeated, which machine should be selected to replace the old equipment? Why?
The 9 percent preferred stock of Home Town Brewers is selling for $48 a share. What is the firm's cost of preferred stock if the tax rate is 0.3 and the par value per share is $115?
The data presented above is the financial statements provided by the client. You are the senior auditor of a Big for audit firm and partner in charge of the engagement has asked you provide an opinion on the financial statements presented above.
Determine the present value of your trust fund if it promises to pay you $50,000 on your 40th birthday seven years from today and earns 10 percent compounded annually
Janson Bottle Corporation sold $400,000 in long-term bonds for $351,040. The bonds will mature in 10 years and have a stated interest rate of 8% and a yield rate of 10 percent.
I have to do a presentation to my team on a topic related to my job. I currently work in the Financial Planning and Analysis department.
Find out the Current Price and Yield to Maturity of 8% semi-annual coupon bond if it has a current yield of 9.3% and matures in 10 years?
Suppose the European central bank wishes to fight inflation by pursuing a contractionary monetary policy. Use a graph of the foreign exchange market for dollars to illustrate the effects on the value of the U.S. dollar.
Use financial calculator to solve for the interest rate involved in the following future value of an annuity due problem. The future value is $57,000, the annual payment is $7,500, and the time period is six years.
East Publishing Corporation is doing an analysis of a proposed new finance textbook. Using the following information
The Asian financial crisis of 1997-98 started with devaluation of the Thai baht in July 1997 and was followed by financial panic that spread to Indonesia, Malaysia, the Philipines & South Korea
Corporation A and B are two identical corporation with equal asset values of $50 million. Corporation A is financed by equity only and has 100,000 shares outstanding.
A ten-year U.S. Treasury bond has a 3.5 percent interest rate, while an identical maturity corporate bond has a 5.25 percent interest rate.
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