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A new heat treatment furnace to be used by an aluminum fabrication plant in Southern Ontarion costs $30,000 to buy. The new furnace will also cost the plant $1,200 immediately in installation and training expenses. Operating and maintenance costs are estimated at $3,000 for the first year, and to increase by $1,320 per year therafter. The scrap value of the furnace can be estimated at any time by declining-balance rate of 15% and the interst rate is 10%.
a) Determine the EAC (Equivqlent Annual Cost) for the furnace over one year, two years, three years and four years of service life.
b) How often should the furnace be replaced, assuming cash flows and interest rates are to be constant over the plant time horizon?
c) What depreciation rate will lead to $3,000 book value for the furnace after four years of use?
d) What does the term "sunk cost" refer to and how would it affect a replacement decision?
Kendra Enterprises has never paid a dividend. Free cash flow is projected to be $80,000 and $100,000 for the next 2 years, respectively; after the second year, FCF is expected to grow at a constant rate of 5%. The company's weighted average cost of c..
Given the following comparative financial data, conduct a trend analysis focusing on current ratio, quick ratio and cash ratio.
You want to have $67,000 in your savings account 12 years from now, and you're prepared to make equal; annual deposits into the account at the end each year, if the account pays 6.80 percent interest, what amount you deposit each year?
Gilliland Motot, Inc., paid a $4.46 dividend last year. If Gilliland's return on equity is 31%, and its retention rate is 31%, what is the value of the common stock if the investors require a rate of return of 18%?
Which one of the following defines the cash cycle?
A person was considering buying a house priced at $300,000. A mortgage company claimed the interest rate for the 20 year loan is 3.75%. What would the monthly payment, if the person decided to borrow 90% of the cost of the house and 100% of the proce..
The real risk-free rate is 3.05%, inflation is expected to be 2.60% this year, and the maturity risk premium is zero. Ignoring any cross-product terms, what is the equilibrium rate of return on a 1-year treasury bond?
A $1,000 par value bond is currently selling in the marketplace. It had an original maturity of 25 years and was sold 11 years ago. Its coupon rate is 8% and you are to determine its current price, given bonds of comparable risk have a yield to matur..
Sam’s Subs has deposited $3,500 in checks received from customers. It has written $1,400 in checks to its suppliers. The initial bank and book balance was $600. If $1,600 of its customer's checks have cleared but only $600 of its own, calculate its f..
The coupon rate on an issue of debt is 8%. The yield to maturity on this issue is 9%. The corporate tax rate is 38%. What would be the approximate after-tax cost of debt for a new issue of bonds?
In 2015 the Keenan Company paid dividends totaling $2,400,000 on net income of $14 million. What is Keenan's long-run average return on equity?
Movements in Cross-Exchange Rates. Last year a dollar was equal to 7 Swedish kronor, and a Polish zloty was equal to $.40. Today, the dollar is equal to 8 Swedish kronor, and a Polish zloty is equal to $.44. By what percentage did the cross-exchange ..
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