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Incremental operating cash inflows
A firm is considering renewing its equipment to meet increased demand for its product. The cost of equipment modifications is $1.95 million plus $108,000 in installation costs. The firm will depreciate the equipment modifications under? MACRS, using a? 5-year recovery period. Additional sales revenue from the renewal should amount to $1.19 million per? year, and additional operating expenses and other costs? (excluding depreciation and? interest) will amount to 45% of the additional sales. The firm is subject to a tax rate of 40%. (Note?: Answer the following questions for each of the next 6? years.)
a. What incremental earnings before? depreciation, interest, and taxes will result from the? renewal?
b. What incremental net operating profits after taxes will result from the? renewal?
c. What incremental operating cash inflows will result from the? renewal?
Assets A B C D Initial investment $15,000 $15,000 $15,000 $15,000 Annual rates of return Pessimistic 8% 5% 3% 11% Most Likely 12% 12% 12% 12% Optimistic 14% 13% 15% 14% Which asset would a Risk-Averse Manager prefer? show me your work that leads to y..
Suppose the 360-day forward exchange rate is 1.657 dollars per British pound, and the current spot rate is 1.625 dollars per British pound. If the 360-day interest rate in the United States is 5% and the 360-day interest rate in Great Britain is 3%, ..
Most states have turned to the lottery to raise money for education and other state financing needs. Determine the largest payout for the state of North Carolina. Explain the options for receiving the money and select the method you would choose. Pro..
A stock's returns have the following distribution: Probability of this demand occurring Rate of Return if this demand occurres .1 (50%) .2 (5) .4 16 .2 25 .1 60 Calculate the stock's expected return, standard Deviation, and Coefficient of variation.
What strategies have you used?Explain the importance of reviewing your credit report. How often should this be done? What are the implications of opening and closing credit cards on one's credit card status and score?
Assume that you are setting up your retirement plan by considering two investment plans together. (Your retirement in 30 years). You want to earn a total of $1,000,000 after 30 years from the following two investment plans together. You currently hav..
Many IRA funds argue that investors should invest at the beginning of the year rather than at the end. What is the difference to an investor's retirement account if she invests $2,200 per year at 10 percent over a 30 year period?
A company is considering two alternatives for manufacturing a certain part.
Parker & Stone, Inc., is looking at setting up a new manufacturing plant in South Park to produce garden tools. The company bought some land 11 years ago for $8 million in anticipation of using it as a warehouse and distribution site, What is the pro..
The liability of those who own a corporation is limited to their investment, while proprietors and general partners have unlimited liability for the obligations of their business. Explain what relevance this has for risk management.
In 1895, the first a sporting event was held. The winner's prize money was $160. In 2007, the winner's check was $1,180,000. What was the percentage increase per year in the winner's check over this period? If the winner's prize increases at the same..
Genesco is considering two alternative 5-year leases. what lease payment amount on the second lease would the company be indifferent between these two options?
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