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A proposed cost-saving device has an installed cost of $540,000. It is in Class 8 (CCA rate = 20%) for CCA purposes. It will actually function for five years, at which time it will have no value. There are no working capital consequences from the investment, and the tax rate is 35 percent.
a. What must the pre-tax cost savings be for us to favour the investment? We require a 11 percent return. (Hint: This one is a variation on the problem of setting a bid price.) (Do not round your intermediate calculations. Round the final answer to 2 decimal places.)
Cost savings $
b. Suppose the device will be worth $78,000 in salvage (before taxes). How does this change your answer? (Do not round your intermediate calculations. Round the final answer to 2 decimal places.)
A stock market comprises 4600 shares of stock A and 1600 shares of stock B. Assume the share prices for stocks A and B are $15 and $30, respectively. If you have $15,000 to invest and you want to hold the market portfolio, how much of your money will..
"The greater the volatility of returns, the greater the risk premium" The risk premium is unrelated to the average rate of return "The lower the average return, the greater the risk premium." The risk premium is not affected by the volatility of retu..
Don also goes to lease an apartment and buy groceries. He signs a lease. He decides that he doesn’t like the apartment after living there for two months. Can he
The next dividend payment by Dizzle, Inc., will be $2.90 per share. The dividends are anticipated to maintain a growth rate of 7.75 percent, forever. Assume the stock currently sells for $49.40 per share. What is the dividend yield?
In addition, you may wish to seek out further information through your own research. When you have reviewed the advice and the plans, please prepare a short (2-3 page) paper discussing:
Heginbotham Corp. issued 20-year bonds two years ago at a coupon rate of 8.3 percent. The bonds make semi annual payments. If these bonds currently sell for 104 percent of par value, what is the YTM?
The Chicken Company, a company with headquarters in Switzerland, has a receivable of one million dollars, which it will receive in one year. Chicken can borrow euro at an annual rate of 10%, can borrow Swiss francs at an annual rate of 9%, and can bo..
You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $210,000.
Waldrop Corporation must install $200 of new equipment in its Ohio plant. It can obtain a bank loan for 100% of the required amount at 7% interest on the loan. Assume that Waldrop's tax rate is 35% and that the equipment's depreciation would be $100 ..
An investor writes (or sells) one put option contract. If the price of gold in the spot market at the maturity date of the option is $1095, what is her profit-loss - The spot rate for the euro when the forward contract matures is $1.50/€. What is h..
Today, the industrial park project was formally announced, and an attorney for the developer has just offered you $190,000 for your land. If you accept this offer, what will be your holding period return on this investment?
An investor purchased a bond for $980, received $75 in interest, and then sold the bond for $950 after holding it for seven months. What is the holding period return?
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