Minimum annual cash flow that a computer must generate

Assignment Help Finance Basics
Reference no: EM131951464

Question: Most businesses replace their computers every two to three years. Assume that a computer costs $2,000 and that it fully depreciates in 3 years, at which point it has no resale value and is thrown away.

a. If the interest rate for financing the equipment is 5 percent, what is the minimum annual cash flow that a computer must generate to be worth the purchase?

Instruction: Round your answers to the nearest dollar.

The minimum annual cash flow must be at least $.

b. Suppose the computer did not fully depreciate but still had a $250 value at the time it was replaced. What is the minimum annual cash flow that a computer must generate to be worth the purchase?

The minimum annual cash flow must be at least $.

Reference no: EM131951464

Questions Cloud

Estimate the value of the firm : Assume that the firm is in stable growth, and that the return on capital and reinvestment rates for the last fiscal year can be sustained forever.
Estimate the reinvestment rate : Caballos, Inc., has a debt to capital ratio of 23%, a beta of 0.58 and a pre-tax cost of debt of 7.4%. The firm had earnings before interest and taxes.
Define how much will you pay for the company stock : Caan Corporation will pay a $2.78 per share dividend next year. The company pledges to increase its dividend by 4.5 percent per year indefinitely.
Should your company buy the pipeline : You can buy a pipeline for the transportation of natural gas to market for 1,000,000. It has an expected life of 7 years and has a scrap value of 300,000.
Minimum annual cash flow that a computer must generate : If the interest rate for financing the equipment is 5 percent, what is the minimum annual cash flow that a computer must generate to be worth the purchase?
What is the return on the portfolio : You buy 1,000 shares IBM stock for $106 and 500 shares of Starbucks stock for $87. IBM stock goes down in value to $91/share.
What is the original payment and new payment : What is the original payment, new payment, difference, present value of the difference, original loan balance in 5 years, new loan balance in 5 years?
What is the present value of the future cash flows : What is the present value of the future cash flows, if you also could earn $140,000 per year rent on the property?
Does one measure make more sense than the others : Does one measure make more sense than the others? What factors would make a stock worth more or less than your calculated value?

Reviews

Write a Review

Finance Basics Questions & Answers

  Project expected npv and standard deviation

What are the project's expected NPV and standard deviation of NPV?

  Emery inc has a beta equal to 15 and a required return of

emery inc. has a beta equal to 1.5 and a required return of 14 based on the capm. if the market risk premium is 8 the

  How would this breech affect the valuation of the stock

When a company has a formal Ethics Policy and does something contrary to that policy, what impact might it have on the value of the stock, the employees, investors, regulators, and other stakeholders? How would this breech affect the valuation of the..

  What are open market operations

Use a T-account for Bank of America and a T-account for the Fed to show the result of the Fed buying $1 million in Treasury bills from Bank of America.

  What would be the amount of free cash flow

Analyzing free cash flow Juda Exercise Equipment, Inc. reported the following statement of cash flows for 2016: Juda plans to purchase a truck for $26,000.

  Prepare a journal entry to correct the error

Wilkins Food Products, Corporation acquired a packaging equipment from Lawrence Specialists Corporation. Lawrence completed construction of the equipment on January 1, 2004.

  After that normal dividend growth of 5 percent is expected

challenge problem ritter incorporated just paid a dividend of 2 per share. its management team has just announced a

  How are monetary policy and inflation related

How are monetary policy, the bond market and inflation related? Apply these relationships to advise a small-business owner who wants to start a pension fund.

  Advantages and disadvantages of using big data

What are some of the advantages and disadvantages of using big data in the supply chain industry? In your opinion

  What is the current price of the bond

26 years ago, Blue Lake Corp. issued 30 year to maturity zero-coupon bonds with a par value of $5,000. The bond has a current yield to maturity of 11.04 percent, compounded annually. What is the current price of the bond?

  What is the current dividend per share

If it's the company's policy to always maintain a constant growth rate in its dividends, what is the current dividend per share?

  Computation of operating cash flows

Computation of operating cash flows using givien detials for the year 2006 and using 2005 and 2006 Balance Sheet

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd