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You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $70,000. The truck falls into the MACRS 3-year class, and it will be sold after three years for $19,000. Use of the truck will require an increase in NWC (spare parts inventory) of $1,000. The truck will have no effect on revenues, but it is expected to save the firm $24,000 per year in before-tax operating costs, mainly labor. The firm’s marginal tax rate is 39 percent. What will the cash flows for this project be? (Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places.) Year 0 1 2 3 FCF $ $ $ $.
A firm should set its growth target equal to its sustainable growth rate. The sustainable growth concept can highlight tensions associated with "competing" objectives within the firm. Generating a higher profit margin provides fuel for a higher susta..
State Probability Return: Stock 1 Return: Stock2 Bear .25 -.020 .034 Normal .60 .138 .062 Bull .15 .218 .092. calculate the covariance of return between Stock 1 and Stock 2\. Calculate the correlation of return between Stock 1 and Stock 2. If you com..
Hart Venture Capital (HVC) specializes in provding venture capital for software devlopment and Internet applications. Currently HVC has two investment opportunities: (1) Security Systems, a firm that needs additional capital to develop an Internet se..
An apartment is expected to produce $115,000 NOI the first year, increasing by 3 percent per year each year over a projected 7 year holding period. A 80 percent loan-to-value ratio is typical. Current terms are 6.5 percent interest for 25 years (annu..
You are going to value Lauryn’s Doll Co. using the FCF model. After consulting various sources, you find that Lauryn has a reported equity beta of 1.8, a debt-to-equity ratio of 0.3, and a tax rate of 30 percent. Based on this information, what is La..
If Manana's balance sheet remained as above but the peso moved to 25 pesos per dollar, what would be the translation gain or loss if translated by the monetary/ non-monetary method?
What were the new construction materials brought into regular use due to the Industrial Revolution? Why were these material better than tRichard Winchester, owner of Winchester Products, is considering introducing a new product which will require $36..
A call option on the stock of Bedrock Boulders has a market price of $7. The stock sells for $29 a share, and the option has a strike price of $26 a share. What is the exercise value of the call option? What is the option's time value?
The value Max[0, X(1 + r)-T - S0] was shown to be the lowest possible value of a European put. Why is this value irrelevant for an American put?
If the market return this year turns out to be 6%, what is the rate of return on the stock?
Keller Cosmetics maintains an operating profit margin of 8.20% and a sales-to-assets ratio of 3.30. It has assets of $540,000 and equity of $340,000. Interest payments are $34,000 and the tax rate is 35%. What is the return on assets? What is the ret..
Consider a property with expected future net cash flows of $50,000 per year for the next 5 years.
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