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You are evaluating a proposal to buy a new milling machine. The base price is $108,000 and shipping and installation costs would add another $12,500. The machine would be sold after 3 years for $65,000. The machine would require a $5,500 increase in net working capital (inventory). There would be revenues of $44,000 per year and cost of $10,000 per year. The company's tax rate is 35%, and the cost of capital (WACC) is 12%. Also the firm spent $15,000 last year investigating the feasability of using the machine. The opportunity cost of purchasing the machine is $5,000.
A) How should the $15,000 spent last year be handled?
B) What are the cash flows for each year - Initial cash flow. Operating cash flow and terminal cash flow?
C) Should the machine be purchased?
Your local travel agent is advertising an upscale winter vacation package for travel three years from now to Antarctica.
Solar Engines manufactures solar engines for tractor-trailers. Calculate the NPV of the decision to grant credit.
what is the firm’s weighted average cost of capital? what is the foreign exchange transaction cost for the firm?
Annual expenses are 40,000 intially, then decrease by 2000 each year beginning at the end of year two and continue decreasing through year six.
Miller Von Enterprises' capital structure consists solely of debt and common equity. It can issue debt at rd = 10.6%, and its common stock currently pays a $1.91 dividend (D0= $1.91). The stock's price is currently $24.75, its dividend is expected to..
Quantitative Problem: Barton Industries expects that its target capital structure for raising funds in the future for its capital budget will consist of 40% debt, 5% preferred stock, and 55% common equity. What is the firm's weighted average cost of ..
Consider a bond paying a coupon rate of 8.25% per year semiannually when the market interest rate is only 3.3% per half-year. The bond has two years until maturity. Find the bond's price today and six months from now after the next coupon is paid. Wh..
What is the value of this stock at the beginning of 2013 when the required return is 13.8 percent?
Phillips Fine Fixtures Inc. wishes to issue new bonds but is uncertain how the market would set the yield to maturity. The bonds would be 20-year, 7% annual coupon bonds with a $1,000 par value. Fisher has determined that these bonds would sell for $..
What are its TIE ratio and its return on invested capital (ROIC)?
The yield rate on a one year zero-coupon bond is currently 7% and the yield rate on a 2 year zero coupon is currently 8%. The treasury plans to issue a two year bond with a 9% annual coupon, maturing at $100 par value. Determine the yield to maturity..
Prime Bank is offering your company the use of their lockbox services. What is the annual net savings from installing this system?
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