Npv and irr for the purchase accompained by service contract

Assignment Help Financial Management
Reference no: EM132052967

A and B COMPANY puchase a machine .the cost of capital is 12% .the cost ofd the machine is $35,000 and is expected to provide additional net cash flows of $5000 per year .the machine will last for 15 years .calculate the NPV and IRR. (B) The machine are willing to offer a permanent service contract for an annual fee of $500 .this will keep the machine new always for ever. the net cash flows will be reduced to $4500 per year .calculate npv and irr for the purchase accompained by service contract.

Reference no: EM132052967

Questions Cloud

Tax requirement for each type of business ownership : what should be considered to understanding the laws, regulations and tax requirement for each type of business ownership?
Calculate the payment after recasting the loan : Calculate the payment after recasting the loan (i.e., after the reset) assuming the interest rate after the initial lock period is 8.0%.
Calculate the after-tax cost of each capital structure : calculate the after - tax cost of each capital structure (a) common equity (b) preferred stock (c) debt
What is the before tax cost of capital if the firm repays : What is the before tax cost of capital if the firm repays the entire loan plus interest (rounded)?
Npv and irr for the purchase accompained by service contract : Calculate npv and irr for the purchase accompained by service contract.
Proposed contract with digital systems : The Spartan Technology Company has a proposed contract with the Digital Systems Company of Michigan.
Standard deviation of expected return of portfolio : Calculate the standard deviation of expected return of a portfolio that has half of its money invested in A and half in B.
Calculate the expected return of portfolio : Calculate the expected return of a portfolio that is half invested in A and half in B.
Calculate the euro-based return an italian investor : Calculate the euro-based return an Italian investor would have realized by investing €10,000 into a $50 American stock.

Reviews

Write a Review

Financial Management Questions & Answers

  What is your payment if the six-month libor

Three months from today you plan to borrow $1.8 Billion for 6 months at LIBOR. what is your payment if the 6-month LIBOR is .28% in two months?

  Lead to economic growth and increase tax revenue

The city of Detroit is deciding whether or not to build an aquarium. Officials believe that a world-class stingray exhibit will attract families from across Michigan to visit the city. In turn, this will spur local businesses, lead to economic growth..

  What is the firm cost of equity

If the current market price for a share is $33, what is the firm’s cost of equity?

  What was the net rate of return on investment

What was the net rate of return on this investment, assuming you are in the US and measure your return in terms of USD?

  Shares of stock-what is the beta of your portfolio

You own 400 shares of Stock A at a price of $60 per share, 530 shares of Stock B at $75 per share, and 650 shares of Stock C at $33 per share. The betas for the stocks are 1.3, 1.8, and .6, respectively. What is the beta of your portfolio?

  Make monthly deposits-retirement account

You are to make monthly deposits of $750 into a retirement account that pays 10 percent interest compounded monthly. Required: If your first deposit will be made one month from now, how large will your retirement account be in 34 years?

  Explain weighted average cost of debt

Calculate Company A's weighted average cost of debt given the following information: (a) Tax Rate: 20%. (b) Average Price of Outstanding Bonds:

  Compute dollar-weighted rate of return

An investment fund has a balance of $10,000 on Jan 1, 2005. On June 1, 2005, the balance is $11,000.

  Overstatement or understatement errors in payroll liability

As the auditor, you are assigned to test whether there are any overstatement or understatement errors in the payroll liability for the Roger Corporation.

  How leaders in those businesses have or have not accomplish

In the case of the Coyote and Road Runner, one might question the ethics of the two characters' behaviors.

  Capital structure and the value of firm graded assignment

“Is there a particular ratio of debt to equity in a company’s capital structure that is optimal to help increase wealth of ordinary shareholders?”

  What is the minimum expected annual return for stock

In order to fund her retirement, Michele requires a portfolio with an expected return of 0.11 per year over the next 30 years. She has decided to invest in Stocks 1, 2, and 3, with 25 percent in Stock 1, 50 percent in Stock 2, and 25 percent in Stock..

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