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Incorporate Working Capital Into Capital Budgeting
The Olney Company purchased a machine 3 years ago at a cost of $150,000. It had an expected life of 10 years at the time of purchase and an expected salvage value of $5,000. The existing machine costs $54,000 year to run and generates $1,000,000 a year in revenue with a gross profit margin of 20%. The old machine can be sold today for $55,000 and the expectation is that it can be sold for $7,500 in 7 years.
A new machine with a 7 year life can be purchased for $225,000. Cash operating expenses will be $65,000 per year. The new machine will generate revenue of $1,100,000 per annum in the first three years of operation and then revenue of the new machine will increase to $1,200,000 per annum for the balance of machine's life. The machine has a gross profit margin of 23% due to fewer defects. At the end of its useful life, the machine will have no value. The firm's tax rate is 25 percent. Straight-line depreciation is used for all assets. The firm's WACC is 12 percent. The firm has an ACP of 63 days and pays its bills after 25 days
your bank is offering 5.5 fixed-rate mortgage requiring a down payment equal to 10 of the homes purchase price. the
The opportunity cost of capital is 11.8 percent. Calculate the NPV of each choice and suggest when should Predator sell the company?
1. What is Opportunity Cost and its role in the reasons that a firm must retain cash.
Dr. Franklin is an Assistant Professor at Northern University. If his salary is $75,000, how much he pay in Social Security taxes?
American Airlines is currently considering the issuance of a series of $1,000 par bonds. The coupon rate offered, based on current market interest rates and the Standard & Poor's based AMR bond rating
Sacramento Health System has bonds outstanding that have five years remaining to maturity, What is the yield to maturity on the issue
Given the forecast of the Canadian dollar along with the forward rate of the Canadian dollar, what is the expected increase or decrease in dollar cash flows.
1. Distinguish between targeted marketing and mass marketing and explain what led to the rise of each.
A. Is your compensating balance sufficient to cover your service charges? If not, how much additional money do you owe the bank? B. What minimum compensating balance would cover your 450 service charge?
Describe an incremental cash flow for a project. Describe three concepts we need to examine to help understand how to estimate the incremental cash flow of a project.
SITXFIN004 - Prepare and monitor budgets - Actual performance sheet and actual revenue and actual expense are provided in the sheet
acetate inc. has equity with a market value of 25 million and debt with a market value of 10 million. the firms
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