Fully depreciated by the straight line method

Assignment Help Financial Management
Reference no: EM13846185

JJ Enterprises is considering the purchase of a new machine that will produce thumb drives. The new machine will require an initial investment of $100,000 and has an economic life of five years and will be fully depreciated by the straight line method. The machine will produce 15,000 thumb drives per year with each costing $2.00 to make. Each will be sold at $4.50. Assume JJ Enterprises uses a discount rate of 14 percent and has a tax rate of 34 percent. What is the NPV of the project and should JJ Enterprises make the purchase.

Reference no: EM13846185

Questions Cloud

Seniority-based pay system or a merit-based pay system : Assume you work for an old established company with a traditionally based pay system. Would you rather have a seniority-based pay system or a merit-based pay system and explain why?
What is the new divisor for the price-weighted index : Able, Baker, and Charlie are the only three stocks in an index. The stocks sell for $48, $400, and $100, respectively. If Baker undergoes a 3-for-2 stock split, what is the new divisor for the price-weighted index?
Description of the organisation and the hrm issue : A brief description of the organisation and the HRM issue. An analysis of the HRM issue. Describe the issue in detail. Explain why the issue needs improving in the organisation; make a case for change
What is the quoted annualized coupon rate : You are considering buying a bond issued by General Motors with exactly 5.5 years remaining to maturity that just paid a coupon yesterday. It rained on your paper this morning so you do not know what the coupon rate is. However you are able to see th..
Fully depreciated by the straight line method : JJ Enterprises is considering the purchase of a new machine that will produce thumb drives. The new machine will require an initial investment of $100,000 and has an economic life of five years and will be fully depreciated by the straight line metho..
Whats lowest price that you would consider selling it for : You are building a pipeline which will generate its first annual cash flow of $2m exactly 5 years from today. As it ages, the volume it transports, and hence the cash flows it creates, will decline by 3% per year. Exactly 27 years from today, this pi..
Calculate financial ratios : It is often stated that anyone with a pencil can calculate financial ratios, but it takes a brain to interpret them. What kinds of things should the analyst keep in mind when evaluating the financial statements of a given firm?
Why you wish to follow you proposed programme : The personal statement is your opportunity to tell us: Why you wish to follow you proposed programme. Why you have chosen to study online. Why you have chosen a UK University to study
Emerge as major producer of computer software : Obsolete Computer Systems, Inc. wants to emerge as a major producer of computer software. The company has two options: Either it can purchase Upstart Software for $25m now whose products are expected to survive 5 years. Or it can develop an ongoing n..

Reviews

Write a Review

Financial Management Questions & Answers

  How much do firms market and book value per share differ

Bauer software''s current balance sheet show total common equity of $ 5,125,000. The company has 530,000 shares of stock outstanding, and they sell at a price of $ 27.50 per share - By how much do the firm''s market and book value per share differ..

  Calculate each projects payback period

Calculate each project's payback period, net present value (NPV),and internal rate of return (IRR).b. Which project (or projects) is financially acceptable? Explain your answer.

  Calculate the present value of thefuture returns

A company issues debentures worth Rs. 100 crore and pays on interest of Rs. 10 crore at the end of 1year. What is the actual cost of debt if the prevailing tax rate is 40%?

  Expected rate of return of both stocks using dividend growth

What are the required rates of returns on both stocks using the CAPM model? What are the expected rates of return of both stocks using the dividend growth model. Which stock would you recommend to purchase or sell? Why?

  What is its after-tax cost of debt

Micro Spinoffs, Inc., issued 20-year debt a year ago at par value with a coupon rate of 5%, paid annually. Today, the debt is selling at $1,120. If the firm’s tax bracket is 30%, what is its after-tax cost of debt? (Do not round intermediate calculat..

  Calculate the cost pf common equity using gordon model

Last year black water inc paid dividends $2.58. Companys dividends are expected to grow at an annual rate of 2.88 percent, forever. The companys common stock is currently selling in the market for $98.95.The investment banker will charge floatation c..

  Marginal-average tax rate paid for firm with taxable income

What is the (1) marginal and (2) average tax rate paid for a firm with taxable income of a). $25,000? b). $85,000? c). $250,000? d). $12 million? e). $200 million?

  Use of a machine for production purposes in his business

A commercial client is seeking use of a machine for production purposes in his business. Suggest which products might be useful to them, and how they are consistent with the aims of Islamic banking?

  Determine the required rate of return

Try to determine the required rate of return of Dark Woods Corporation common stock. The firms beta is 1.5. The rate on a ten year treasury bond is 2.68 percent and market return is 6.71%. The prices for the Red Star Corporation for the first quarter..

  Explain the nature of groups and group behavior

Explain the nature of groups and group behavior within organisations you identified and discuss factors that may promote or inhibit the development of effective teamwork in organisations you identified.

  What are implications for cash flow and shareholder wealth

Companies often try to keep accounting earnings growing at a relatively steady pace in an effort to avoid large swings in earnings from period to period. They also try to manage earnings targets.

  Infrastructure work problem

There is a mountain in North Carolina. In five (5) years, it will be zoned for 15 housing lots. At that time, one can install roads and infrastructure at a cost of $50,000 per lot. In the sixth year, with the infrastructure work complete, the lots ca..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd