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X Company is considering replacing one of its machines in order to save operating costs. Operating costs with the current machine are $65,000 per year; operating costs with the new machine are expected to be $37,310 per year. The new machine will cost $157,000 and will last for five years, at which time it can be sold for $1,000. The current machine will also last for five more years but will not be worth anything at that time. It cost $42,000 four years ago, but its current disposal value is only $7,000.
Assuming a discount rate of 8%, what is the incremental net present value of replacing the current machine?
Assume the following two changes: 1) both machines will last for six more years, 2) the salvage value of the new machine after six years will be zero. If X Company replaces the current equipment, what is the approximate internal rate of return [enter your answer as .XX, so 1% would be .01]?
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Hook Industries' capital structure consists solely of debt and common equity. It can issue debt at rd = 12%, and its common stock currently pays a $3.50 dividend per share (D0 = $3.50). The stock's price is currently $22.50, its dividend is expected ..
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ICS plans on expanding their plant and will fund $2,000,000. Part of the funding will come from cash, but the balance of $775,000 will be financed. The interest rate will be 5% and ICS plans on borrowing the funds for 4 years. Prepare a loan amortiza..
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