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One year? ago, your company purchased a machine used in manufacturing for $90,000. You have learned that a new machine is available that offers many? advantages; you can purchase it for $170,000 today. It will be depreciated on a? straight-line basis over ten? years, after which it has no salvage value. You expect that the new machine will contribute EBITDA? (earnings before? interest, taxes,? depreciation, and? amortization) of $45,000 per year for the next ten years. The current machine is expected to produce EBITDA of $22,000 per year. The current machine is being depreciated on a?straight-line basis over a useful life of 11? years, after which it will have no salvage? value, so depreciation expense for the current machine is $8,182 per year. All other expenses of the two machines are identical. The market value today of the current machine is $50,000. Your? company's tax rate is 42%?, and the opportunity cost of capital for this type of equipment is %10%. Is it profitable to replace the? year-old machine? What is the The NPV of the replacement?
What is the potential arbitrage profit from buying a put option on one share of stock?
You have decided to purchase a new automobile with a hybrid-fueled engine and a six-speed transmission. After the trade-in of your present car, the purchase price of the new automobile is $30,000.
Bank regulators require adequate capital levels in banks because:
Kristin Caldwell has just graduated from college and is considering job offers from two companies. Although the salary and insurance benefits are similar, the retirement programs are not. The other firm has a contributory plan that allows employees t..
Select a company in which you have an interest. For that company, describe a capital budgeting project (i.e., an investment in fixed assets) that might be undertaken by the company. Determine (make estimate) of the discount rate, or hurdle rate, that..
Which of the following assumptions would you need for stock price maximization to be the right objective?
Should American states sponsor and market lotteries even when the expected monetary value of most lotteries is very low? Debate the reasons for and against.
Merger Valuation Hastings Corporation is interested in acquiring Vandell Corporation. Vandell has 1 million shares outstanding and a target capital structure consisting of 30% debt. Vandell's debt interest rate is 7.6%. Assume that the risk-free rate..
Interest rates are expressed as annualized rates for the term specified. Assume semi-annual compounding.
If the company has no debt, what is the beta of Cunningham cuisine’s equity? what is the expected return on Cunningham Cuisine’s stock?
You deposit $1,900 at the end of each year into an account paying 10.1 percent interest. How much money will you have in the account in 24 years? How much will you have if you make deposits for 48 years?
Default Risk Premium A company's 5-year bonds are yielding 7.8% per year. Treasury bonds with the same maturity are yielding 5.15% per year, and the real risk-free rate (r*) is 2.05%. The average inflation premium is 2.7%, and the maturity risk premi..
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