Reference no: EM131355203
NEW PROJECT ANALYSIS You must evaluate a proposal to buy a new milling machine. The base price is $135,000, and shipping and installation costs would add another $8,000. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $94,500. The applicable depreciation rates are 33%, 45%, 15%, and 7% as discussed in Appendix 12A. The machine would require a $5,000 increase in net operating working capital (increased inventory less increased accounts payable). There would be no effect on revenues, but pretax labor costs would decline by $52,000 per year. The marginal tax rate is 35%, and the WACC is 8%. Also, the firm spent $4,500 last year investigating the feasibility of using the machine.
a. How should the $4,500 spent last year be handled?
b. What is the initial investment outlay for the machine for capital budgeting purposes, that is, what is the Year 0 project cash flow?
c. What are the project’s annual cash flows during Years 1, 2, and 3?
d. Should the machine be purchased? Explain your answer.
|
What is the companys horizon value-firms overall value today
: Wayne corporation is a growing distributor of electronic products. Analysts are forecasting the following free cash flow series. what is the companys horizon value. What is the firms overall value today. if wayne has 90 million of debt but no preffer..
|
|
What will be passaic beta coefficient
: Stock is selling for 45$. It is a constant growth with a growth rate of 4% per year. Next years expected dividends are 2.50$ / year. Calcualte required rate of return. If the risk free rate is 2.7% and the risk premium on the market is 8%, what will ..
|
|
Common stock valuation-should you make the investment
: (Common stock valuation) The common stock of NCP paid $1.21 in dividends last year. Dividends are expected to grow at an annual rate of 5.40 percent for an indefinite number of years. If your required rate of return is 8.30 percent, what is the value..
|
|
Calculate customer lifetime value
: Assume that a customer shops at a local grocery store spending an average of ?$350 a? week, resulting in a retailer profit of ?$35 each week from this customer. Assuming the shopper visits the store all 52 weeks of the? year, calculate the customer l..
|
|
What are the project annual cash flows
: NEW PROJECT ANALYSIS You must evaluate a proposal to buy a new milling machine. The base price is $135,000, and shipping and installation costs would add another $8,000. The machine falls into the MACRS 3-year class, and it would be sold after 3 year..
|
|
Why would you care as a short-term investor
: Given that the U.S. is not a closed economy, which additional component(s) of GDP could be affected (and in which direction) under the hypothetical assump¬tion that the rest of the world is unaffected by news from Wall Street - How would your answ..
|
|
Explain the concept of duty to bargain
: Explain the concept of "duty to bargain." Explain yellow-dog contracts. What are the three ways by which employees can become union members?
|
|
Concept such as emotional development and attachment theory
: If you are the parent of a young child and you choose attachment, briefly summarize the text material that you are addressing and apply it to an example related to parenting your toddler.
|
|
What is the theoretical minimum for number of workstations
: Samuel Smith's company wants to establish an assembly line to manufacture its new product, the iStar phone. Samuel's goal is to produce 60 iStars per hour. What is the theoretical minimum for the number of workstations that Samuel can achieve in th..
|