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Although the Chen Company's milling machine is old, it is good working order and would last for another 10 years. It is inefficient compared to modern standards, though, and so the company is considering replacing it. The new milling machine, at a cost of $110, 000 delivered and installed, would also last for 10 years and would produce after-tax cash flows (labor savings and depreciation tax savings) of $19, 000 per year. It would have zero salvage value at the end of its life. The project cost of capital is 10%, and its marginal tax rate is 35%. Should Chen buy the new machine?
Gardial GreenLights, a manufacturer of energy efficient lighting solutions, has had such success with its new products that it is planning to substantially expand its manufacturing capacity with a $20 million investment in new machinery.
Pet Store Inc.sell on terms of 2/20 net 50. What is the effective annual cost of trade credit under these terms?
What are the expected returns for Stocks X and Y, E(rX) and E(rY)? What are the standard deviations of the returns for Stocks X and Y, ?X and ?Y? Suppose you have $1000 to invest, and decide to invest $700 in Stock X and $300 in Stock Y. What are the..
You have prepared a forecast of free cash flows for the XYZ corporation. what is the terminal value in year 5?
The following defined pension data of Marin Corp. apply to the year 2017. Projected benefit obligation, prepare a pension worksheet for Marin Corp.
To estimate the cost of capital, you have been provided with the following data: rRF = 5.00%; the market return is 11.00%; and Beta = 1.0. Based on the CAPM approach, what is the cost of equity? -------- 5.0% 6.0% 10.4% 11.0%
Stephenson Real Estate Company was founded 25 years ago by the current CEO, Robert Stephenson. The company purchases real estate, including land and buildings, and rents the property to tenants. Explain. Construct Stephenson’s market value balance sh..
At expiration, the time value of an option: If the price of an underlying asset has a standard deviation of zero:
Define the following: Effective interest rate - Future value (FV) - Future value factor - Future value factor of an annuity (FVFA) - Future value of an annuity.
Alabaster Incorporated has an equity cost of capital of 14%. The debt to value ratio is .6, the tax rate is 35%, and the cost of debt is 8%. What is the cost of equity if Alabaster was unlevered?
What was the original annual rate of return needed to reach your goal when you started the fund two years ago? With only $140,000 in the fund and 10 years remaining until your first child starts college, what annual rate of return would the fund ha..
The rate that can be locked in for the period between six months and nine months using an FRA is 7%. - What arbitrage opportunities are open to the bank? All rates are continuously compounded.
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